The Bank of Japan unexpectedly kept its benchmark interest rate at 0.25%, defying predictions of a 25 basis point increase. The decision, made in an 8-1 vote, was driven by a desire to analyze the impact of recent economic factors, including a weakening yen and potential wage-price increases. While acknowledging uncertainties surrounding Japan's economic outlook, BOJ Governor Kazuo Ueda emphasized the cautious approach to rate hikes due to moderate inflation.
The Bank of Japan on Thursday held its benchmark interest rate steady at 0.25%, surprising economists polled by Reuters, who expected a 25 basis points hike.
The central bank did note, however, that there"remain high uncertainties surrounding Japan's economic activity and prices." Separately, Ueda also said that while the U.S. economy overall remains firm,"there's uncertainty over the policies of the incoming U.S. administration, so we need to scrutinize the impact more carefully."Analysts from investment bank Credit Agricole Securities Asia said the decision to leave rates unchanged was due to the BOJ's inability to overcome opposition from the government for a third rate hike amid growing concerns that real GDP growth would be negative in 2024.
The BOJ"will resume its tightening cycle before long," Marcel Thieliant, head of Asia-Pacific at Capital Economics said in a statement after the decision. Capital Economics expects a hike in January after a new set of economic forecasts come in.
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