The Bank of Japan kept rates unchanged at 0.5% in its May 2025 meeting, in line with expectations. The “Statement on Monetary Policy” was short, noting that the BoJ policymakers decided unanimously to “encourage the uncollateralized overnight call rate to remain at around 0.5%.”

The BoJ also updated its outlook for growth and inflation:

• The outlook for growth in 2025 was downgraded from a median estimate of 1.1% in the previous outlook to 0.5%.
• The outlook for inflation in 2025 was also downgraded with the median CPI (less fresh food) rate estimated at 2.2%, down from 2.4% previously. On the other hand, the BoJ revised up its median CPI (less fresh food and energy) forecast to 2.3%, from 2.1% previously.
• Policy implications: Real interest rates remain low; BoJ may gradually raise the policy rate if the baseline outlook materializes. However, policy adjustments will be data-dependent, given high global uncertainty.