The Bank of Japan kept its benchmark interest rate unchanged at 0.25% on Thursday, choosing to take its time to evaluate The impact of financial and foreign exchange markets on economic activity and prices in Japan.

this JPY After the interest rate decision, the exchange rate fell 1.27% against the US dollar, hitting a low of 156.77 on Thursday, the lowest level in more than four months. At the same time, the country’s Nikkei 225 Index It fell 0.69% throughout the day and closed at 38,813 points.

The decision to keep rates on hold surprised economists polled by Reuters, who had expected a 25 basis point hike. In the United States, the Federal Reserve on Wednesday Cut interest rates by 25 basis pointsbringing the federal funds rate to 4.25%-4.5%.

The Bank of Japan said in a statement that it made the decision to keep interest rates unchanged by an 8-1 split, with board member Naoki Tamura advocating a 25 basis point increase in interest rates.

However, the central bank did note that “there remains a high degree of uncertainty about Japan’s economic activity and prices.”

“In particular, as corporate behavior has recently shifted more towards higher wages and prices, exchange rate changes are more likely to affect prices than in the past,” the bank added.

Bank of Japan Governor Kazuo Ueda told a news conference late Thursday that the Bank of Japan realizes that if it takes too long to raise interest rates, it will have to increase the pace of interest rate increases at future meetings.

However, with underlying inflation growing at only a “moderate pace,” the BOJ is likely to be slow to raise interest rates,” he said.

In addition, Ueda also said that although the U.S. economy generally remains strong, “there is uncertainty about the policies of the incoming U.S. administration, so we need to look more carefully at its impact.”

The Bank of Japan’s next meeting is scheduled for January 24, shortly after US President-elect Donald Trump takes office.

Japan’s GDP The first two quarters of the year contracted year-on-year, with growth of just 0.5% in the quarter ended in September.

The BOJ’s decision is in line with a CNBC poll that showed 13 of 24 economists expected the BOJ to keep its key interest rate unchanged in December before raising rates at its next meeting in January. .

The survey was conducted between Dec. 9 and 13, when the Fed signaled fewer rate cuts in 2025.

Marcel Thieliant, head of Asia Pacific at Capital Economics, said in a statement after the decision that the Bank of Japan “will soon resume its tightening cycle.” Capital Economics expects a rate hike in January following the release of a series of new economic forecasts.

“It’s worth noting that unlike October, the decision to keep rates on hold was not unanimous,” Thieliant added, noting that Tamura voted to raise rates to 0.5%.

Japan’s recent economic data still supports interest rate hikes. Headline inflation in October is 2.3%Inflation exceeded the Bank of Japan’s 2% target for the 30th consecutive month. November inflation data will be released on Friday.

Business confidence among Japan’s major companies is also higher than expected Bank of Japan’s latest Tankan surveyThe index of large manufacturing companies climbed to 14 in the quarter to December, up from 13 in the September quarter and exceeding the 12 forecast by economists polled by Reuters.

The index tracks the business confidence of Japan’s largest companies and helps the Bank of Japan consider when setting monetary policy. Higher numbers mean there are more optimists than pessimists, and vice versa.

Bank of America analysts said in a report on December 13 that the December Tankan survey showed that Japan’s economy remains resilient.

“This also confirms that the economic and inflation trends are in line with the Bank of Japan’s base case (which is a prerequisite for raising interest rates),” they added.

However, this does not mean that the need to raise interest rates is urgent. Analysts said imported inflationary pressures were receding, and business medium-term inflation expectations remained stable despite the impending Trump administration and the risk of trade tariffs.