Citing Trump Administration tariffs and a likely sluggish domestic economy ahead, the Bank of Japan on Thursday held its key interest rate unchanged for a second-straight policy session.

The central bank voted to keep its policy interest rate at 0.5%, while lowering estimates for Japan's gross domestic product (GDP) and inflation, in the years ahead.

In its quarterly economic outlook, the Bank of Japan decreased its fiscal 2025 (started April 1) GDP growth outlook to 0.5% from the previous 1.1%, and lowered the GDP expansion outlook for fiscal 2026 to 0.7% from 1%.

The central bank's inflation forecast, on the nation's consumer price index core (CPI-core, that strips out fresh food), was eased to 2.2% for fiscal 2025 from previous forecast of 2.4%. The estimate for fiscal 2026 was trimmed to 1.7% from 2%.

The Bank of Japan has a 2% annual inflation target on the CPI core.

"With regard to the risk balance, risks to economic activity are skewed to the downside for fiscal 2025 and 2026. Risks to prices are also skewed to the downside for fiscal 2025 and 2026," explained the Bank of Japan.

Battling sluggish national economic growth and near deflation, the Bank of Japan kept its key interest rate at negative 0.1% for nine years until March of 2024, when it raised the bar to positive 0.1%.

The central bank then raised the key rate again to 0.25% in August of last year, and then to 0.50% in January of 2025, citing inflation rates above target.

However, the Bank of Japan has also reiterated it wants to keep domestic demand strong enough to boost real wages, and promote domestic consumption, to keep the domestic economy growing.