The Bank of Japan kept its current benchmark interest rate of 1.25% on Friday, rejecting a request from board member Takata to raise the target to 1.5%. In an 8-1 vote to maintain borrowing costs, the bank dismissed Takata’s argument that the economy has entered a new phase requiring a faster approach to neutral rates, though the central bank pledged it will continue to raise interest rates as price and financial conditions evolve.
During the policy meeting, the BOJ formally announced that underlying inflation has reached its 2% target for the first time since it set that goal in 2013. While the bank maintained the 1.25% rate, the highest level since 1995, the currency market reacted with a slight decline in the dollar, which fell 0.37% to trade at 157.115 yen per dollar.