BoJ keeps benchmark policy rate unchanged

The Bank of Japan kept its benchmark policy rate unchanged on Thursday at 0.25%, as widely expected.

In its first policy announcement since an inconclusive general election, the BoJ indicated it will keep hiking borrowing costs if the economy sustains a moderate recovery.

In its quarterly outlook statement, the Bank said inflation would remain around its 2% target in the coming years.

The BoJ said it "needs to pay due attention to the future course of overseas economies, particularly the US economy, and developments in financial markets".

It added: "It also needs to examine how these factors will affect the outlook for Japan's economic activity and prices, the risks surrounding them, and the likelihood of realising the outlook."

Danske Bank said: "The BoJ will prefer a wait-and-see approach ahead of the US presidential election next week and until the political situation after the ruling coalition lost its majority is more certain.

"We expect another hike in December, particularly because the BoJ might see it as necessary to support the yen.

"With inflation on target and consumers' purchasing power heading slowly in the right direction, there is also an economically sound case for it, irrespective of the yen."

Oxford Economics said: "The BoJ's next policy move is subject to two major factors. First, given the disastrous election result, the administration of Prime Minister Shigeru Ishiba may become more cautious about the pace of rate hikes. Second, if the US dollar continues to strengthen, the weak yen may come back as a major consideration for the BoJ."