Japan Braces for Economic Uncertainty Amid Ultra-Low Rates

The Bank of Japan (BOJ) maintained ultra-low interest rates, highlighting global economic uncertainties and a fragile domestic recovery. Despite projections of inflation near 2%, the BOJ emphasized caution due to overseas economic trends and political instability, which might influence future rate hikes.

The Bank of Japan opted to maintain its ultra-low interest rates on Thursday, outlining a cautious approach in response to growing global economic uncertainties. This decision underscores the challenges posed by Japan's fragile domestic recovery.

Despite continuing inflation projections hovering around its 2% target, BOJ representatives highlighted the importance of monitoring international economic movements, notably in the U.S., to inform future interest rate decisions. BOJ Governor Kazuo Ueda emphasized the need to observe these developments carefully in a post-meeting press conference.

While Japan demonstrates signs of economic resilience with rising factory output and retail sales, political instability following a mixed election result complicates efforts to adjust monetary policy. Analysts predict that the BOJ might delay further rate hikes until political dynamics stabilize, possibly extending beyond 2025.

(With inputs from agencies.)