BOJ holds short‑term rate at 0.75%, signals steady path amid mixed data

The Bank of Japan left its short‑term interest rate target unchanged at 0.75%, opting for continuity as policymakers weigh the durability of inflation and wage gains. After lifting rates to multi‑decade highs in late 2025, the board chose to pause, citing the need to evaluate domestic demand, corporate pricing power, and external risks. The decision keeps funding conditions stable for households and firms while preserving flexibility for future moves if inflation proves persistent.

Key highlights

Policy decision:

• Short‑term rate target maintained at 0.75%; balance of risks judged to warrant a hold.

Inflation and wages:

• Focus on whether core inflation remains above target alongside broad‑based wage growth in spring negotiations.

Currency considerations:

• Monitoring yen volatility and imported cost pressures to avoid destabilizing financial conditions.

Growth outlook:

• Mixed indicators resilient services, softer manufacturing argue for gradual normalization rather than rapid tightening.

Forward guidance:

• Data‑dependent approach; incremental adjustments possible if price stability is achieved without undermining recovery.

By holding steady, the BOJ aims to anchor expectations while keeping options open for measured tightening should the inflation‑wage cycle strengthen.

Sources: Bank of Japan; Reuters; Bloomberg News.