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January 27, 2025BANK OF JAPAN MONETARY POLICY On January 24, 2025, the Policy Board of the Bank of Japan decided to raise their uncollateralized overnight call rate to around 0.5%.
The Bank of Japan projects the economy to keep growing at a pace above the potential growth rate. The growth is supported by government’s economic measures and with overseas economies continuing to grow.
Year-over-year inflation (all items less fresh food) is likely to be in the range of 2.5-3.0% for 2024, 2.5% for 2025 and around 2.0% in 2026. The effects of past rise in import prices is expected to wane, but underlying CPI inflation is expected to increase with a growing sense of labor shortage. Japan's output gap is expected to improve, and medium-long term inflation expectations are predicted to rise.
The risk to the monetary policy would come from Japan's economic activity and prices, as well as the overseas economies and developments in commodity prices. Japanese firms' behavior has also shifted towards raising wages and prices with exchange rate developments more likely to affect prices.
With the price stability target of 2%, it will conduct monetary policy as appropriate, in response to developments in economic activity and prices as well as financial conditions, from the perspective of sustainable and stable achievement of the target.
The Bank will release their next monetary policy statement on March 18, 2025.
Source: Bank of Japan, Statement on Monetary Policy; Economic Outlook, January 2025
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