The Bank of Japan decided, as widely expected, to keep its short-term policy rate unchanged at 0.75%. While the “hold” was the majority decision, the meeting revealed a significant hawkish shift in the internal vote and a sharp revision to the bank’s economic projections.
The 6-3 decision was notably split. Three board members—Hajime Takata, Naoki Tamura, and Junko Nakagawa—dissented, voting instead for an immediate hike to 1.0%. They argued that the price stability target has essentially been met and that upside risks to inflation are becoming significant.
The BoJ significantly raised its core CPI (excluding fresh food) forecast for fiscal 2026 to 2.8%, up from the 1.9% projected in January. This spike is primarily attributed to rising energy costs and global supply chain pressures linked to ongoing Middle East tensions.
In a classic “stagflationary” signal, the BoJ cut its real GDP growth forecast for fiscal 2026 to 0.5% (down from 1.0%). This reflects the drag that high energy prices and global geopolitical instability are expected to have on domestic demand.
Yen saw a mild recovery following the announcement. Markets are interpreting the 6–3 split as a clear signal that a move to 1.0% is likely on the table for the June or July meetings.
Full BoJ statement and Outlook for Economic Activity and Prices.
