Bank of Japan keeps main interest rate unchanged

TOKYO

The Bank of Japan kept its main interest rate unchanged on July 31, after increasing it to a 31-year high in June, as it slightly increased its economic growth outlook for this year.

The BoJ said in a statement that its policy board agreed by an eight-to-one majority to keep its benchmark at 1.0 percent, a move widely expected by markets.

The yen weakened on the decision, which came a day after it rallied against the dollar -- fuelling speculation that Japanese authorities had intervened in currency markets.

Friday's announcement came as bank officials come under pressure to tighten monetary policy as inflation creeps up and the yen wallows around a four-decade low against the dollar.

Still, they revised their outlook for inflation the current fiscal year to 2.5 percent, from 2.8 percent previously expected.

They also estimated the economy to expand 0.6 percent.

"Japan's economy is expected to continue growing moderately, albeit at a decelerated rate, in fiscal 2026," the bank said in a statement.

It said that while the impact on energy costs of the Middle East crisis would weigh on growth "the economy is likely to be underpinned by factors such as the government's various measures and accommodative financial conditions, in addition to an increase in global Al-related demand".