The Bank of Japan held its policy rate at around 1.0% for the intermeeting period by an 8-1 vote, as it projected moderate but slower growth in fiscal 2026 and underlying inflation approaching its 2% price stability target, while judging inflation risks to be skewed to the upside. Over the past year, the rate was 0.5% in July 2025, rose by 25 basis points to 0.75% in December and by another 25 basis points to 1.0% in June 2026. The central bank will encourage the uncollateralized overnight call rate to remain around 1.0%. Consumer price index inflation excluding fresh food was recently around 1.5%, but is expected to accelerate clearly above 2% from the second half of fiscal 2026 before declining toward that level later in the projection period, while tight labor markets and accommodative financial conditions support activity. The recent yen depreciation has substantially raised import-price inflation and is expected to lift durable-goods prices. Higher crude oil prices linked to the Middle East are weighing on activity and raising prices, while stronger global artificial intelligence-related demand is supporting growth and adding price pressures. The Bank of Japan said it will continue raising the policy rate and adjusting monetary accommodation in response to economic, price and financial conditions, considering the timing and pace while monitoring Middle East developments, artificial intelligence-related demand and foreign exchange rates.
Bank of Japan2026-07-31
Bank of Japan Holds Policy Rate
The Bank of Japan held its policy rate at around 1.0% by an 8-1 vote, projecting moderate but slower fiscal 2026 growth and underlying inflation approaching its 2% target, with risks skewed to the upside. It will consider further rate increases while monitoring Middle East developments, global artificial intelligence-related demand and foreign exchange rates.