BoJ Held Rates Steady and Slashed Japan's Economic Growth Outlook

Akira Ito
01 May, 2025
Tokyo

Japan's benchmark indexes edged higher, and the yen eased following rate decisions from the Bank of Japan. 

The Nikkei 225 Stock Average advanced 0.5%, and the Topix index edged higher 0.2% following a rebound in overnight trading in New York. 

The Bank of Japan held its short-term rate steady at 0.5%, as widely anticipated. and the central bank left rates unrevised for the second consecutive meeting. 

The yield on 10-year Japanese bonds held near 1.31%, following rate decisions by the Bank of Japan.

The Bank of Japan also lowered its economic growth outlook for the current fiscal year to 0.5% from the previous estimate of 1.0% in January. 

Policymakers lowered GDP growth rate for fiscal 2026 to 0.7% from the previous estimate of 1.0%. 

Policymakers decided to wait and review the impact of the U.S.-Japan trade talks and high U.S. tariffs on the export-driven Japanese economy. 

Investors are worried that high tariffs on Japanese industrial goods and vehicles could dampen corporate sales and lower earnings.

Consumers are reluctant to spend, despite the sustained wage increases over the last three years, according to the latest update from the Japan Chain Store Association.

Consumers have been reluctant to spend because wage increases have lagged inflation for most workers at mid-sized and small businesses, and only employees at large companies have been able to secure wage increases higher than inflation.

Supermarket sales in fiscal 2024 ending in March advanced 1.4% from the previous year but declined on a volume basis. 

The increase in sales was largely driven by price increases, and food sales, which account for 70% of chain store sales, increased 3.5%.

Apparel sales decreased 5.3% in the fiscal year because of above-average temperatures and weaker-than-normal demand for winter items.  

 

Japan Indexes and Stocks 

The Nikkei 225 Stock Average increased 0.5% to 36,241.70, and the Topix index edged up 0.2% to 2,673.46. 

Japan's automakers were in focus amid worries that elevated U.S. tariffs and rising global competition from China will shrink global sales. 

Toyota Motor increased 0.4% to ¥2,741.0, Honda Motor edged up 0.3% to ¥1,458.50, and Nissan Motor advanced 1% to ¥345.20. 

Banks edged higher after the Bank of Japan's rate decisions, and the yen weakened a fraction to 143.30 against the U.S. dollar. 

Mitsubishi UFJ Financial Group edged up 0.1% to ¥1,806, Sumitomo Mitsui Financial Group advanced 0.1% to ¥3,400, and Mizuho Financial Group inched higher 0.1% to ¥3,583. 

Shipping companies were in focus amid ongoing uncertainties about U.S. trade policy. 

Nippon Yusen decreased 0.4% to ¥4,630.0, Mitsui O.S.K. Lines dropped 4% to ¥4,547.0, and Kawasaki Kisen Kaisha fell 0.1% to ¥1,948.50. 

Seven & I Holdings Co. Ltd. advanced 2.5% to ¥2,168.50, Fast Retailing edged up 0.3% to ¥47,150.0, Takashimaya gained 1.2% to ¥1,113.0, and Isetan Mitsukoshi Holdings Ltd. increased 1.2% to ¥1,861.0.