Nikkei Rises as Bank of Japan Signals Prolonged Low-Rate Environment

Tokyo’s Nikkei stock average experienced gains on Thursday, building upon earlier momentum after the Bank of Japan (BOJ) revised its growth and inflation projections downward. This adjustment suggests a potentially extended timeline for future interest rate increases.

The Nikkei concluded the trading day with a 1.1% increase, settling at 36,452.30. The BOJ’s announcement was released during the midday break.

The broader Topix index also saw positive movement, increasing by 0.5%.

The BOJ attributed its revised forecasts to uncertainties arising from the trade policies of the U.S. administration. The bank more than halved its growth forecast for the current fiscal year to 0.5% and anticipates that underlying inflation will require an additional year to align with its established policy target.

As anticipated, the central bank opted to maintain the benchmark interest rate at 0.5%.

Expert Analysis

Norihiro Yamaguchi, an economist at Oxford Economics, commented, “Absent a significant moderation of U.S. trade measures, we anticipate the BOJ will uphold the current policy rate throughout this year and in 2026, potentially raising it to 0.75% in 2027.”

Ryosei Akazawa, Japan’s economy minister and chief negotiator, is scheduled to conduct his second round of negotiations regarding a tariff agreement in Washington later on Thursday.

Optimism surrounding trade discussions contributed to the Nikkei’s rise, positioning it for its first monthly gain in four months.

U.S. President Donald Trump indicated on Wednesday that agreements with Japan, South Korea, and India might be nearing completion.

Wataru Akiyama, a strategist at Nomura Securities, noted, “Even incremental progress in these negotiations should restore calm to Japanese equities, potentially enabling the Nikkei to reach the 37,000 level.”

Shipping stocks underperformed, declining by 1.8% amid persistent uncertainty in global commerce. This sector was the weakest among the Tokyo Stock Exchange’s 33 industry groups.

The technology-heavy Nikkei performed strongly as shares linked to semiconductors continued to rise throughout the session.

Advantest, a chip-testing equipment manufacturer, saw a substantial increase of 6.9%, making it the Nikkei’s top performer in index-point terms. This surge mirrored after-hours gains made by major U.S. tech companies like Meta Platforms and Microsoft following strong financial results.