Bank of Japan holds rate at 1.0%, lifts growth outlook

The Bank of Japan kept its main interest rate at 1.0 percent on Friday and slightly raised its economic growth outlook for the year.

The central bank said its policy board voted eight to one to leave the benchmark unchanged, after raising it in June to its highest level in 31 years.

The bank estimated that Japan's economy would expand 0.6 percent. It also revised its inflation outlook for the current fiscal year to 2.5 percent, down from a previous forecast of 2.8 percent.

“Japan's economy is expected to continue growing moderately, albeit at a decelerated rate, in fiscal 2026,” the Bank of Japan said.

The bank said the effect of the Middle East crisis on energy costs would weigh on growth, while government measures and accommodative financial conditions were likely to support the economy.

The yen weakened after the decision. The announcement came as Bank of Japan officials faced pressure to tighten monetary policy while inflation rose and the yen traded around a four-decade low against the dollar.