The Bank of Japan kept its interest rate unchanged, amid uncertain economic prospects resulting from the conflict in the Middle East.
At the conclusion of a two-day meeting, the central bank decided on Thursday to maintain its benchmark interest rate at 0.75%, according to a statement. The decision was in line with the expectations of all 51 economists surveyed by Bloomberg.
The central bank voted by a majority of 8 votes to 1 against the decision, with Hajime Takata dissenting and calling for a second consecutive interest rate hike.
The pressures of war and inflation put the bank in a difficult position.
The war in Iran puts the Bank of Japan in a delicate position, as rapid increases in oil prices are expected to fuel inflation, before the higher costs are passed through the economy, potentially putting pressure on economic activity and consumption.
The central bank added the Middle East to its list of risk factors, without adjusting its inflation forecasts, indicating that it still sees a possible path to raising interest rates in the coming months.
The yen largely stabilized following the Bank of Japan's statement, trading at around 159.60 against the dollar. It had touched 159.90 earlier in the day, prompting the finance minister to issue a fresh warning, hinting at possible intervention to curb currency movements.
Watch the governor's statements and their impact on the yen.
Bank of Japan Governor Kazuo Ueda is scheduled to hold a press conference later on Thursday, during which he will present details of the decision and outline his vision for the path of interest rates.
Currency traders will be on tenterhooks, as his detailed explanations of the monetary policy decision have at times put further downward pressure on the yen.
