BoJ Holds Rates, Flags Balanced Risks to Economic Activity

2026-07-31 03:22 By Farida Husna 1 min. read

The Bank of Japan kept its short-term policy rate unchanged at 1.0% at its July 2026 meeting, leaving borrowing costs at their highest level since September 1995 after raising the rate by 25bps in June, as the board warned that underlying inflation could exceed the 2% target.

The widely expected decision passed by an 8-1 vote, with board member Hajime Takata dissenting and calling for a hike to 1.25%.

Policymakers judged risks to economic activity to be broadly balanced, while noting the need to watch the impact of global AI-related demand and FX movements.

In its quarterly outlook, the BoJ cut its FY2026 inflation forecast to 2.5% from 2.8%, reflecting government steps to ease households' summer energy costs.

Meantime, policymakers slightly raised their FY2026 GDP growth projection to 0.6% from 0.5%, amid resilient domestic demand and continued support measures.

For FY2027, the BoJ lifted its inflation forecast to 2.4% from 2.3%, while raising its GDP growth outlook to 0.8% from 0.7%.



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