Bank of Japan Maintains Interest Rate at 0.5% Amid Global Trade Uncertainties
Bank of Japan Maintains Interest Rate at 0.5% Amid Global Trade Uncertainties
On May 1, 2025, the Bank of Japan (BOJ) announced its decision to keep the short-term policy interest rate steady at 0.5%. This move comes as the central bank faces mounting challenges from escalating global trade tensions, particularly due to newly implemented U.S. tariffs, which have begun to impact Japan’s economic outlook.
In its latest policy meeting, the BOJ’s board unanimously agreed to maintain the current interest rate, citing concerns over a weakening economic recovery. The central bank concurrently downgraded its economic growth forecasts, attributing the revision to dampened global demand resulting from heightened U.S. tariffs .
BOJ Governor Kazuo Ueda addressed these concerns in a press conference, highlighting that the escalating trade uncertainty could hinder Japan’s economic performance by reducing global growth, corporate profits, and consumer spending. Despite these challenges, Ueda emphasized the BOJ’s commitment to its inflation target of 2%, acknowledging that the timeline for achieving this goal may be extended due to current economic conditions .
The decision to hold the interest rate steady was anticipated by analysts, who noted the central bank’s cautious approach in the face of global economic headwinds. The BOJ plans to maintain its accommodative monetary stance while closely monitoring economic indicators, including the prolonged influence of tariffs introduced under former President Trump .
Market reactions to the BOJ’s announcement were notable. The yen declined by up to 0.6% against the dollar, and 10-year Japanese government bond yields fell to a three-week low of 1.26%. Conversely, the Nikkei share average gained up to 1%, reflecting investor optimism about the central bank’s commitment to supporting the economy amidst global uncertainties .
