Bank Of Japan Keeps Interest Rate Steady At 0.5%

The Bank of Japan or BOJ has decided to keep interest rates steady in an official announcement on Wednesday, as policymakers are spending more time deciding how higher tariffs from the US will affect exports.

Why Has Japan Kept Its Interest Rates Steady?

Japan is heavily reliant on exports and this decision came amidst fears of a global slowdown caused by the United States President Donald Trump's tariff policy which overshadows wage and the price data showing Japan making progress in achieving the BOJ's 2% inflation target.

What Are The Challenges That Japan Is Facing?

The Bank of Japan said that the rising costs would push up inflation at home while trade policies of other countries cast doubts over Japan's economic outlook.

"Concerning risks to the outlook, there remain high uncertainties surrounding Japan's economy and prices including the evolving situation regarding trade and other policies in each jurisdiction," BOJ said in an official statement on Wednesday.

BOJ had raised rates earlier in January and the board had voted unanimously to maintain the bank's short-term policy rate at 0.5% at a two-day meeting.

What Do Experts Think About This Move?

"Persistent price pressures warrant further monetary tightening in Japan, but growth risks are building as well. Trade tensions leave a cloud over Japan's export outlook, and it is not clear yet whether Japanese consumers will step up purchases on the back of higher wages," said Fred Neumann, a Reuters report cited the Chief Asia Economist at HSBC in Hong Kong.

"In the end, however, it is a question of 'when' not 'if' the BOJ will hike again," he said.

He further added that the next move could come as early as June.

The market reaction to this decision was muted with the dollar moving sideways around 149.50 yen.

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