TOKYO — The Bank of Japan kept its key short-term interest rate steady at 0.75% on Tuesday in a split vote, as global tensions from the ongoing conflict in the Middle East clouded the economic outlook.
The decision came at the end of the central bank's two-day monetary policy meeting on April 27 and 28. The policy board voted 6-3 to maintain the rate, with three members dissenting in favor of raising it to 1.0%, according to the BOJ's statement.
Governor Kazuo Ueda is scheduled to hold a news conference later on Tuesday to explain the decision. The hold was widely expected by economists despite earlier speculation about a possible hike.
The three dissenting members argued that risks to inflation had risen due to higher energy prices stemming from the Middle East conflict, reports said. The BOJ adjusted its economic projections, raising its inflation forecasts while trimming growth estimates, officials indicated in the accompanying outlook report.
The policy rate has been at 0.75% since the BOJ's last adjustment. The decision reflects caution amid uncertainty over the impact of the regional conflict on Japan's import-dependent economy and price developments.
"The BOJ probably would see it feasible to stand pat this month," one source familiar with the bank's thinking told Reuters ahead of the meeting.
Markets had largely priced in no change, with attention now shifting to whether the split vote signals a greater likelihood of a rate increase at the next meeting in June. The yen steadied following the announcement.
The BOJ has been gradually normalizing policy after years of ultra-loose monetary settings aimed at achieving its 2% inflation target. Recent data showed core consumer prices remaining elevated, though the full effects of external shocks are still being assessed.
Details on the precise revisions to the BOJ's growth and inflation projections were contained in the Outlook for Economic Activity and Prices released alongside the decision. The central bank also updated its assessment of risks to the economy.
As of Tuesday afternoon, no further immediate policy signals emerged beyond the statement and vote breakdown. Trading in Japanese government bonds and currency markets continued following the announcement, with reactions described as muted in initial reports.
The BOJ's next policy meeting is scheduled for June. Further clarity on the timing of any future adjustments is expected from Governor Ueda's press conference and subsequent communications.
