The Bank of Japan kept its policy settings unchanged and interest rates steady at 1 per cent at the end of its two-day meeting on Friday. This decision to sit tight was widely expected following the bank's move in June to raise the policy rate from 0.75% to 1%, marking the highest benchmark rate since 1995.
The decision follows a second consecutive month of quickening inflation in Tokyo. Since the Tokyo consumer price index is considered a leading indicator for nationwide price trends, the bank remains on track to raise interest rates again in the coming months.
While the Bank of Japan nudged its economic growth forecast higher, signaling confidence that the economy remains on track for further policy normalization, it has signaled its resolve to continue pushing up borrowing costs. This occurs as speculation continues regarding the pace of future hikes and mounting price pressures from the weak yen and Middle East conflict risk driving underlying inflation above the bank's target.