Bank of Japan maintains interest rates and projects economic growth.

Tokyo, Japan - The Bank of Japan (BOJ) kept its benchmark interest rate unchanged at 0.25% on Friday, signaling a continuation of its accommodative monetary policy as the country's economy shows signs of moderate recovery.

The central bank's Policy Board voted unanimously to maintain the current rate for the intermeeting period, according to a statement released after its two-day monetary policy meeting.

The BOJ said Japan's economy is expected to grow above its potential rate, supported by moderately growing overseas economies and a gradual intensification of a virtuous income-spending cycle.

The year-on-year increase in the consumer price index (CPI), excluding fresh food, has recently been between 2.5% and 3.0%. 

The BOJ projects this trend to continue through fiscal 2025, driven by factors including the fading effects of government measures suppressing inflation.

Underlying CPI inflation is anticipated to rise gradually, with the BOJ citing an improving output gap and increasing medium- to long-term inflation expectations.

The central bank warned of high uncertainties surrounding Japan's economic activity and prices, including developments in overseas economies, commodity prices, and domestic firms' wage- and price-setting behavior.

"It is necessary to pay due attention to developments in financial and foreign exchange markets and their impact on Japan's economic activity and prices," the BOJ stated, noting that recent shifts in firms' behavior towards raising wages and prices make exchange rate developments more likely to affect prices compared to the past.

The next Summary of Opinions from the monetary policy meeting will be released on October 1, and the full minutes are scheduled for publication on November 6.