Bank of Japan keeps key rate unchanged

The Bank of Japan kept its key interest rate unchanged at 0.25% today, reflecting caution among central bankers and raising questions as to whether the bank had bowed to pressure from the government.

Prominent Japanese media, in the run-up to the meeting, had reported that the bank was unlikely to raise rates. Prior to those reports, investors had been braced for a tightening.

The Bank of Japan has been in a quandary. The Japanese economy has been showing an extended recovery but worries remain given soft price pressures and moderate growth in consumption. One senior member of Japan’s ruling party said this week that the government should formally request a delay in the bank’s vote.

The Bank of Japan voted 6 to 3 in favor of keeping interest rates unchanged.

The bank increased its key rate last year for the first time in six years, not long after it ended its ultra-easy policy of flooding the market with excess funds.