The Bank of Japan (BoJ) kept its policy interest rate unchanged at 0.5% on Tuesday, in line with market expectations.
Japan's economy has recovered moderately, although some weakness has been seen in part, the bank said, adding that overseas economies have also grown moderately, although some weaknesses are reflected in trade and other policies.
Exports and industrial production have continued to be more or less flat as a trend, although there has been some front-loading due to the rise in US tariffs, it noted.
On the inflation side, the bank said the effects of the past rise in import prices and of the recent rise in food prices such as rice prices are expected to wane.
"Meanwhile, underlying CPI inflation is likely to be sluggish, mainly due to the deceleration in the economy," it said.
The bank will reduce the planned amount of its monthly purchases of Japanese government bonds to about 2 trillion yen ($13.84 billion) in January-March 2027.
The BoJ had been keeping its rate at minus 0.1% since 2015 but decided to raise it to 0.1% last March and then hiked it to 0.25% last July and to 0.5% this January.
