Japan’s central bank kept interest rates at 0.5 percent on Thursday, warning of lingering economic “high uncertainties” linked to U.S. trade tariffs.
The decision, widely expected by economists, came after the first monetary policy meeting since Sanae Takaichi became Japan’s new prime minister last week.
She is widely seen as a supporter of monetary easing and active fiscal spending to support the economy.
“High uncertainties remain about the impact of trade and other policies on economic activity and prices at home and abroad,” the BoJ said in a statement after the decision.
The announcement also came after US Treasury Secretary Scott Bessent told his Japanese counterpart about the importance of “anchoring inflation expectations”.
Bessent visited Tokyo with US President Donald Trump, who met Takaichi face-to-face for the first time.
“The message was clear – Japan’s balance sheet can no longer afford the distortions of ultra-low rates and the global system can no longer run on the assumption that it will just always absorb excess liquidity,” said Stephen Innes, managing partner of SPI Asset Management.
“Crucially, there are few signs that the bank is becoming less concerned about the impact of higher tariffs,” Marcel Thieliant, head of Asia-Pacific capital economics, said in a note.
“The bank still sees a risk that lower profits could lead to a slowdown in wage growth as firms make more efforts to cut costs,” he said, adding that another rate hike would come in January.
Officials began raising rates below zero in March last year as the figures signaled the end of the country’s “lost decades” of stagnation with soaring inflation.
But with concerns over the global outlook and rising US tariffs, the bank suspended its tightening measures at the start of 2025, with the latest hike in January taking rates to their highest level in 17 years.
The yen weakened slightly against the dollar after the BoJ decision, which was adopted by seven votes to two.
Takaichi, 64, an acolyte of former Prime Minister Shinzo Abe, has championed her mentor’s “Abenomics” economic policies, including massive monetary easing and active fiscal spending.
But its ministers said the BoJ has independence in its monetary decisions.
