BOJ Maintains Rate, Raises Inflation Forecast amid Yen Weakening and Growth Downgrade

The Bank of Japan has maintained its interest rate at 0%-0.1%, in line with analyst predictions following a policy meeting today. This decision comes after lower than expected inflation figures were reported by Tokyo this April, resulting in a core annual reading of just 1.6%. However, no explanation was provided for the continued weakening of the Japanese yen since its removal from negative interest rates and abandonment of yield curve control policies last month. The currency fell below the symbolic threshold against the US dollar after today’s announcement to reach a level not seen since April 2019 at 156.11 YEN per USD. In other news, Japan’s central bank has also raised its forecast for inflation in fiscal year 2024 from previous predictions issued by The BOJ’s January economic assessment which concluded an enduring slowing pattern might affect the country’s economy and price levels over time due to factors such as population aging. This new forecast projects CPI to stay around or beyond three percent up till October in 2036; however, it predicts a deceleration towards two percent by fiscal years ending March 2025-March 2027 as underlying price hikes come back to average inflation levels. The BOJ also downgraded its GDP growth forecast for the same year from January’s estimate of one percent to seven tenths of a percentage point, and said that moving forward it would only react upon “economic/prices events” via possible fine-tuned policies if realized as anticipated or in response to other significant changes.