Bank of Japan, Benchmark Rate Frozen at 0.75%... Monitoring International Oil Price Risks

The Bank of Japan recently considered economic uncertainties and decided to keep the benchmark interest rate unchanged at 0.75%. Rising international oil prices and tensions in the Middle East are seen as the main factors.

The Bank of Japan—commonly known as the BOJ—held a two-day monetary policy meeting and made the decision to maintain the interest rate. This decision aligns with the expectations of some market experts. Considering the escalation of tensions in the Middle East caused by Israel and the US attacking Iran, and the resulting surge in international oil prices, the BOJ made this decision.

After announcing the rate hold, the BOJ emphasized in a statement that it must closely monitor instability in international financial markets and fluctuations in crude oil prices. It specifically mentioned the potential for rising oil prices to increase inflationary pressures on Japanese consumers. Since Japan’s real interest rate remains relatively low, the BOJ also indicated that if economic conditions and price trends develop as expected, it plans to gradually raise the policy interest rate in the future.

Governor Ueda Haruhiko stated at a subsequent press conference that the BOJ is closely watching the impact of Middle East tensions on Japan’s economy and explained that future policy decisions will also consider exchange rate fluctuations as an important variable. The current yen-dollar exchange rate is around 159.1 yen, reflecting a weaker yen, as exchange rate movements now have a greater impact on prices compared to the past.

Looking ahead, the BOJ expects to carefully adjust its interest rate policy while closely monitoring international developments—particularly in the Middle East, oil price fluctuations, and exchange rate changes. Since ending its negative interest rate policy last year and maintaining a gradual rate hike stance, it is anticipated that the BOJ will proceed with a cautious and systematic approach.