ISTANBUL

The Bank of Japan (BoJ) on Thursday decided to keep the policy rate constant at 0.5% for the fourth consecutive time, warning that "high uncertainties" remain over the impact of US trade policies on the economy and prices at home and abroad, according to Kyodo News.

The decision matched the market estimates of no change in the rate.

Compared to June's last meeting, when the central bank issued a warning that the consequences of US tariffs were "extremely uncertain," the bank's assessment of the current tariff situation was less pessimistic.

It said the Japan-US trade agreement is among "positive developments" it sees.

"It is therefore necessary to pay due attention to the impact of these developments on financial and foreign exchange markets and on Japan's economic activity and prices," the BoJ said in a statement.

The BOJ stated that it is still committed to raising interest rates further if the economy and prices improve, albeit maintaining a cautious stance.

Meanwhile, as food prices continue to rise, the bank increased its inflation forecast for the current fiscal year from April.

In contrast to its previous forecast of 2.2%, the central bank now projects core consumer prices—which do not include volatile fresh food—to increase by 2.7% in the upcoming fiscal year, led by rising costs for rice and other food products.

According to updated projections, the core CPI is expected to increase by 1.8% in fiscal 2026 (up from the April estimate of 1.7%) and by 2% in fiscal 2027 (up from 1.9%).

The Japanese economy is expected to expand by 0.6% in fiscal 2025, compared to an estimated 0.5% increase in April estimate.

Last week, US President Donald Trump announced the completion of a trade agreement with Japan, saying the country would pay a 15% tariff on exports to the US.

Sharing the news on his Truth Social account, Trump called it "perhaps the biggest deal ever made."