The Bank of Japan held its short-term policy rate at 0.5 per cent at its May 2025 policy meeting, extending a pause in its rate hiking cycle for the second consecutive meeting. The decision was unanimous.
The BoJ had raised its policy rate to 0.5 per cent in January 2025, lifting borrowing costs to their highest level in 17 years.
FORECASTS CUT
The bank lowered both its growth and inflation forecasts for the current fiscal year.
The BoJ's inflation target is 2 per cent. The revised forecasts did not fundamentally alter the bank's medium-term view that inflation would eventually converge towards the target, but they pushed back the assumed timeline.
POLICY OUTLOOK
Despite the hold, the BoJ signalled that it remained willing to raise rates again once its economic and inflation forecasts materialised.