Japan’s Nikkei climbs as BOJ signals longer road to rate hikes

TOKYO: Japan’s Nikkei share average rose on Thursday, extending early gains after the Bank of Japan slashed growth and inflation forecasts in a sign it would take longer than previously expected to raise interest rates again.

The Nikkei ended the day up 1.1% at 36,452.30. The BOJ’s policy announcement came during the midday trading recess.

The broader Topix added 0.5%.

The BOJ cited uncertainties stemming from U.S. President Donald Trump’s aggressive and erratic trade policies in more than halving its growth forecast for the current fiscal year to 0.5%, and projected underlying inflation to take about an additional year to be consistent with its policy target.

The central bank kept the benchmark rate at 0.5%, as widely expected.

“Without a significant easing of U.S. tariff policy, we expect the BOJ will maintain the current policy rate this year and in 2026, before raising the policy rate to 0.75% only in 2027,” said Norihiro Yamaguchi, an economist at Oxford Economics.

Later on Thursday, Japan’s chief negotiator, economy minister Ryosei Akazawa, is due to hold his second round of talks on a tariff deal in Washington.

Japan’s Nikkei rises on trade talk hopes; set for first monthly gain in four

U.S. President Donald Trump said on Wednesday that deals with Japan, South Korea and India might be close.

“Any progress in these negotiations, and although it will be little by little, we should see calm return to Japanese equities, and the Nikkei could recover to the 37,000 level,” said Wataru Akiyama, a strategist at Nomura Securities.

Notably, shipping shares as a group were the worst performers among the Tokyo Stock Exchange’s 33 industry groupings, dropping 1.8% amid ongoing global trade uncertainty.

The tech-heavy Nikkei outperformed as semiconductor-related shares added to gains throughout the day.

Chip-testing equipment maker Advantest jumped 6.9% and was the Nikkei’s biggest gainer in index-point terms, as it tracked after-hours advances for U.S. tech megacaps Meta Platforms and Microsoft on strong financial
results.