ISTANBUL

The Bank of Japan held its benchmark interest rate steady at 0.5% on Friday, matching market expectations, as the nation's inflation declined to its lowest levels since November 2024.

The central bank said in a statement that inflation expectations have increased "moderately," with core inflation falling between 2.5% and 3% as a result of rising food prices.

The impact of growing food prices, particularly those of rice, is anticipated to lessen, the central bank stated.

The decision to hold the rate unchanged was taken by a 7-2 majority vote, with the dissenters suggesting a raise to 0.75%.

The bank has kept interest rates unchanged for five consecutive meetings, with the last increase occurring in January of this year. However, it has indicated that it is open to more hikes depending on the state of the economy.

The decision came as Japan's core inflation, which excludes prices of fresh food, declined to 2.7% in August, its lowest level since November 2024.

The inflation figure for August was in line with market expectations and was down for a third straight month.

Additionally, headline inflation fell to 2.7% from 3.1% in July, the lowest level since November 2024.

The "core-core" inflation rate, which excludes the cost of energy and fresh food and is regularly tracked by the Bank of Japan, decreased from 3.4% in July to 3.3%.

Rice inflation, which has contributed to the country's cost-of-living issue, fell dramatically to 69.7% from 90.7% in July, but remains at historic highs.