Japan central bank holds rates, cuts economic, inflation outlook

TOKYO, May 1 (Xinhua) -- Japan's central bank on Thursday cut its economic and inflation projections for fiscal 2025 and kept its benchmark interest rate unchanged as it continues to gauge the impact of U.S. tariffs on the economy.

The Bank of Japan (BOJ) made no adjustment to the short-term policy rate, an uncollateralized overnight call rate, currently 0.5 percent, at a two-day policy meeting that concluded Thursday.

BOJ Governor Kazuo Ueda stressed during a press conference that the bank remains on track to seeking additional interest rate hikes, but an unclear economic outlook due to U.S. tariffs leaves the timing of the next rate hike fluid.

Ueda added that he expects U.S. tariffs to remain at levels that "cannot be ignored."

Meanwhile, in the BOJ's latest quarterly outlook report released after the policy meeting, the central bank expects the Japanese economy to grow 0.5 percent in the current fiscal year that started in April, compared with its earlier projection of a 1.1 percent expansion.

It projects that the core consumer price index (CPI), excluding volatile fresh food, for the fiscal year through March 2026, will climb 2.2 percent, against 2.4 percent forecast in January.

The BOJ added that Japan's real gross domestic product (GDP) is projected to grow 0.7 percent in fiscal 2026, revised down from the 1.0 percent expansion, while core CPI is projected to gain 1.7 percent in fiscal 2026, down from 2.0 percent forecast in January.

The BOJ also released its forecasts for fiscal 2027 for the first time, putting inflation at 1.9 percent and the GDP at 1.0 percent. ■