[Breaking News] Bank of Japan Maintains Benchmark Interest Rate at 0.5% Annually

The Bank of Japan maintained its benchmark interest rate at 0.5% annually on the 19th. Having raised the rate by 0.25% points in January, the decision reflects the need to further monitor the impact on the economy and prices. Concerns about downside risks to the global economy due to U.S. tariff policies also played a role.

At its monetary policy meeting today, the Bank of Japan determined that 'the economy and prices are moving largely as expected, and inflation is not strong enough to warrant rapid interest rate increases.' Deputy Governor Shinichi Uchida stated at a press conference on the 5th, "This is not a pace where we raise rates every time."

Previously, many voices within the Bank of Japan suggested that "we need to better understand the impact of January's rate hike. The March meeting will discuss how tariff policies affect Japanese prices." The focus was on evaluating the overseas economy rather than adjusting rates.

Japanese inflation continues to rise, driven by soaring rice prices. The Consumer Price Index (CPI, excluding fresh food) for January rose 3.2% compared to the same month last year. This marks the third consecutive month of widening increases. Corporate wage increases are also progressing smoothly. According to the first tally of the Spring 2025 wage negotiations, the average basic wage increase rate reached 3.84%.

The Bank of Japan is strengthening its vigilance against global economic slowdown. This is because the Japanese economy could be affected by U.S. President Donald Trump's tariff increases. When asked in parliament on the 12th 'what concerns you most,' Governor Kazuo Ueda responded, "I'm worried about uncertainties surrounding overseas economic and price trends."

In the foreign exchange market, yen buying continues as a risk aversion measure. This stems from expectations that the interest rate gap between the U.S. and Japan will narrow. The yen-dollar exchange rate has recently been moving below 150 yen per dollar. The market believes there is a high possibility that the Bank of Japan will implement an additional rate hike in June or July.

Tokyo=Kim Il-gyu, Correspondent

Reporter Kim Il-gyu black0419@hankyung.com