TOKYO (AP) — Japan’s central bank kept its key interest rate unchanged at 0.5% Friday, in a decision that was widely expected, given recent inflation trends that have stayed above target.
The Bank of Japan issued its decision on the overnight call rate after a two-day meeting by its policy board.
“Japan’s economy has recovered moderately, although some weakness has been seen in part. Overseas economies have grown moderately on the whole,” it said in a statement.
The U.S. Federal Reserve cut its policy rate by 0.25 percentage points earlier this week, the Fed’s first cut since December, and lowered its short-term rate to about 4.1%, down from 4.3%.
Japan had been ailing from deflationary trends in recent years, but prices are gradually rising. Recent government data show consumer prices rising above the central bank’s target of 2%, at between 2.5% and 3%.
The Bank of Japan noted exports will be hit by higher tariffs, which have come about because of U.S. President Donald Trump’s policies. There was an increase in trade in anticipation of the tariffs, but those rises are now tapering off, it said.
Also mentioned as a risk factor was the uncertainty in domestic politics. Prime Minister Shigeru Ishiba is stepping down, and the ruling party is holding an election to choose a new leader.
Five candidates are expected to enter the race, with a party vote coming early next month. The grip on power by the Liberal Democratic Party, which has ruled postwar Japan almost incessantly, appears to be unraveling lately.
The Japanese stock market has been booming recently, with the benchmark Nikkei 225 hitting another record Thursday, cheered by the Fed’s rate cut. Shares were falling slightly in Friday morning trading.
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