BOJ Keeps Policy Intact, Cuts FY 2025 GDP Forecast (UPDATE 2)

Jiji Press

12:14 JST, May 1, 2025

Tokyo, May 1 (Jiji Press)—The Bank of Japan on Thursday decided to keep its monetary policy unchanged while cutting its inflation and economic growth forecasts.

Amid growing uncertainty over the course of the global economy in the face of U.S. President Donald Trump’s high tariff policy, the BOJ is closely monitoring how the Japanese economy and prices will be affected.

The nine members of the Japanese central bank’s Policy Board, at a two-day meeting from Wednesday, unanimously voted to maintain the policy of guiding the unsecured overnight call rate, Japan’s benchmark short-term interbank lending rate, to around 0.5 pct. The policy rate was raised from around 0.25 pct in a decision made in January.

In its latest quarterly Outlook for Economic Activity and Prices report, adopted at the Policy Board meeting, the BOJ pushed back the projected timing of stably achieving its price stability target of 2 pct to the latter half of the report’s projection period through fiscal 2027.

The central bank now forecasts that Japan’s core consumer price index, which excludes often volatile fresh food prices, will rise 2.2 pct in fiscal 2025, which started last month, down from 2.4 pct in the previous report released in January. The core CPI growth outlook was revised down to 1.7 pct from 2.0 pct for fiscal 2026 and the newly disclosed growth projection for fiscal 2027 stood at 1.9 pct.

The BOJ had expected that its 2 pct price stability target would be realized stably in the latter half of the previous outlook report’s projection period through fiscal 2026.

Also in the latest outlook report, the BOJ cut its growth projection for Japan’s real gross domestic product for fiscal 2025 to 0.5 pct from the previously projected growth of 1.1 pct. The GDP growth outlook was revised down to 0.7 pct from 1.0 pct for fiscal 2026. In fiscal 2027, the real GDP is seen rising 1.0 pct.

The BOJ maintained its assessment that the Japanese economy has “recovered moderately, although some weakness has been seen in part,” according to the report.

Looking ahead, the central bank said that there are “various risks,” adding, “In particular, it is extremely uncertain how trade and other policies in each jurisdiction will evolve and how overseas economic activity and prices will react to them.” The BOJ said it is necessary to “pay due attention” to the impact of these developments on Japan’s economic activity and prices.