Bank of Japan keeps interest rates unchanged for third straight meeting

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Key Takeaways

The Bank of Japan maintained interest rates at 0.25% for the third straight meeting.
Unchanged rates reflect careful monitoring of domestic wage growth and US economic policies.

The Bank of Japan kept interest rates unchanged at 0.25% during its Thursday meeting, marking the third consecutive hold following similar decisions in September and October.

The decision was not expected. According to a recent survey, a narrow majority of economists predicted the BoJ would maintain current rates at the conclusion of its two-day meeting on December 19. Many, however, expected a potential rate increase in January based on economic indicators.

The central bank’s stance reflects its careful approach as it monitors domestic wage growth, spending patterns, and potential policy shifts under the incoming Trump administration.

Regular wages in Japan have been increasing at an annual rate of 2.5% to 3%, driving inflation above the BoJ’s 2% target for more than two years. However, recent declines in household spending have contributed to the bank’s cautious approach to rate hikes.

The BoJ last raised rates in July and has indicated willingness to tighten further if wage growth meets expectations. The central bank is also weighing external factors, particularly the impact of US economic policies under Trump, which could affect Japan’s economic outlook.

Market expectations for a December rate hike have diminished following recent media reports. Analysts indicate the BoJ may wait for results from upcoming wage negotiations in early 2025 before adjusting monetary policy.

The decision comes as the US Federal Reserve cut interest rates by 25 basis points on Wednesday, its third reduction since the Coronavirus pandemic began more than four years ago.

This is a developing story.