Japan's central bank left its key interest rate unchanged at 0.75 percent in a policy decision, it said in a statement on Friday.

The Bank of Japan (BoJ) began hiking rates from below zero in 2024, as figures signalled an end to the country's "lost decades" of stagnation.

The monetary status quo was widely anticipated by analysts after a rate hike in mid-December.

The BoJ predicts that consumer price inflation, excluding fresh food, will fall below two percent year on year during the first half of 2026, noting the government's measures against inflation.

The bank's decision came as Prime Minister Sanae Takaichi dissolved parliament on Friday ahead of a snap election on February 8.

Public discontent over rising prices largely contributed to the downfall of prime minister Shigeru Ishiba, whom Takaichi succeeded in October, vowing to address the issue and shore up the world's fourth-largest economy.

"Japan's economy is likely to continue growing moderately, with overseas economies returning to a growth path and as a virtuous cycle from income to spending gradually intensifies," the BoJ said. (AFP)