The Bank of Japan has held its benchmark interest rate despite forecasting a sharp rise in inflation as the war in the Middle East clouds the global economic outlook and tests the country given its exposure to rising energy prices.
The BoJ’s decision on Tuesday to keep rates at about 0.75 per cent was in line with market expectations, but came via a six to three vote of the Monetary Policy Committee — the biggest divergence of opinion under governor Kazuo Ueda, and since the launch of the bank’s negative interest rate policy in 2016.
The three dissenting members called for an immediate rate increase to 1 per cent. Traders are increasingly convinced that rates will rise after the next meeting in June, as the central bank resumes its effort to “normalise” monetary policy from decades of low rates and anaemic price growth.