Bank of Japan Governor Kazuo Ueda [EPA Yonhap News]

The Bank of Japan, Japan's central bank, kept its benchmark interest rate unchanged at around 0.75% on December 19th, as market expectations predicted.

According to Kyodo News and other sources, the Bank of Japan decided to maintain its short-term policy interest rate without adjustment during its Monetary Policy Meeting held over two days until today.

The Bank of Japan had raised the short-term policy interest rate from around 0.5% to around 0.75% at its meeting in December of last year, and has now kept rates unchanged for two consecutive meetings until today.

Japanese media had predicted that the Bank of Japan would not change its interest rate policy, considering the unstable situation in the Middle East following attacks by the US and Israel on Iran, as well as the sharp rise in international oil prices.

At this meeting, 8 out of the 9 policy board members agreed to a rate freeze, while the remaining member proposed raising the rate to 1%, according to the Asahi Shimbun.

The Bank of Japan stated, "Unstable movements are appearing in international financial markets, and crude oil prices have risen sharply, necessitating close attention to future trends."

The bank also pointed out that the surge in crude oil prices could lead to an accelerated rise in Japanese consumer prices.

The increase in crude oil prices could lead to price hikes for a variety of products, from gasoline to plastics, and consequently, if corporate performance deteriorates, it could put a brake on wage increase movements.

Furthermore, the Bank of Japan maintained its existing policy of continuing to raise interest rates, judging that real interest rates in Japan remain low.

The Bank of Japan, led by Governor Kazuo Ueda, has been gradually raising interest rates since ending its negative interest rate policy in March 2024, after 17 years.

There had been growing sentiment in the financial markets that the Bank of Japan would raise interest rates at its meeting on April 27th-28th.

The depreciation of the yen is also expected to influence future interest rate policy decisions.

The yen-dollar exchange rate briefly rose to 159.89 yen on the day, nearing the 160 yen mark.

Asahi explained, "If Governor Ueda shows a cautious stance on raising interest rates, expectations for a rate hike may recede, potentially accelerating the pace of yen depreciation."