The Bank of Japan (BOJ) on Thursday cut its economic and inflation projections for the current fiscal year from April and maintained its benchmark interest rate, as concerns grew over the impact of hefty US tariffs on the economy.
The central bank warned of a decline in domestic corporate profits as trade frictions are likely to lead to a slowdown in overseas economies. It also revised downward its outlook for economic growth and prices for fiscal 2026.
In the latest quarterly outlook report, the central bank said it expects the Japanese economy to grow 0.5 percent in the current fiscal year that started in April, compared with its earlier projection of a 1.1 percent expansion.
Core consumer prices are projected to rise 2.2 percent in fiscal 2025, against 2.4 percent forecast in January.
“It is extremely uncertain how trade and other policies in each jurisdiction will evolve and how overseas economic activity and prices will react to them,” the BOJ said after leaving the short-term rate unchanged at around 0.5 percent for the second consecutive meeting as widely expected.
The BOJ, which has long targeted sustainable 2 percent inflation, said it expects the rate to range between 1.5 and 2.5 percent between fiscal 2025 and 2027, the forecast period of the latest report.
