Following its July meeting, the Bank of Japan raised the interest rate by 15 basis points to 0.25%. The policy board voted 7-2 to lift the rate. Economists had expected the rate to remain at 0.1%.
Meanwhile, the Central bank has decided to reduce the volume of monthly direct purchases of government bonds to about 3 trillion yen by the first quarter of 2026, compared with around 6 trillion yen previously.
The Bank of Japan has also published updated economic forecasts. The Central Bank now expects inflation to be 2.5% in fiscal year 2024 (-0.3% compared to the previous forecast presented in April). Policymakers said that the revision of the forecast was caused by measures taken by the government to reduce energy prices. Meanwhile, the inflation forecast for the 2025 fiscal year was raised by 0.2% to 2.1%, while the forecast for the 2026 fiscal year remained unchanged (1.9%). The central bank said it expects core consumer inflation excluding volatile fresh food prices to reach 2.5% in the year ending March 2025 (-0.3% compared with a previous forecast). It projected that core consumer prices will rise 2.1% in the year ending March 2026 and 1.9% the following year.
The Bank of Japan also said it forecasts GDP growth of 0.6% in fiscal year 2024 (-0.2% compared to the previous forecast). Meanwhile, economic growth forecasts for fiscal years 2025 and 2026 were maintained at 1.0%.