At its meeting that concluded Friday morning, January 23, the Bank of Japan decided to maintain its monetary policy and interest rates unchanged. Members voted 8-1 to keep the interest rate at 0.75%, as expected, following a 25-basis-point increase in December to its highest level in three decades. Member Hajime Takata favored raising the rate to 1%, citing the risk of rising inflation.

The Bank of Japan’s quarterly outlook report showed the bank raising its growth and inflation forecasts. The bank increased its growth forecast for the fiscal year ending March 2026 to 0.9%, up from 0.7% in its October forecast, and to 1% for the entire year, up from 0.7% in October. It also raised its forecast for 2027 to 0.8%.

Conversely, the bank expects inflation to fall below its 2% target in the first half of the year and reach 1.9% by year-end, compared to 1.8% in its October forecast. It anticipates inflation to reach 2% in 2027. Core inflation, which excludes food prices, is expected to continue rising moderately, reaching 2.2% this year, up from 2% in the October forecast, and 2.1% in 2027, up from 2% in the October forecast.