BOJ keeps rates steady, projects inflation staying near 2% in coming years

TOKYO (Reuters) - The Bank of Japan kept interest rates unchanged on Friday and issued fresh estimates projecting inflation to stay near its 2% target in the next three years, signalling its readiness to hike borrowing costs later this year.

As widely expected, the BOJ maintained its short-term interest rate target at a range of 0-0.1% in a unanimous vote.

In fresh quarterly forecasts, the board projected inflation, as measured by an index stripping away the effect of fresh food and fuel costs, to hit 1.9% in the current fiscal year that began in April, followed by 1.9% in fiscal 2025 and 2.1% in 2026.

In the previous forecast, the BOJ had projected inflation to hit 1.9% in both fiscal 2024 and 2025.

The central bank ended eight years of negative rates and other remnants of its unorthodox policy last month, making a historic shift away from decades of massive monetary stimulus that was aimed at quashing deflation and revitalising growth.

(Reporting by Leika Kihara, Kantaro Komiya, Tetsushi Kajimoto, Satoshi Sugiyama, Makiko Yamazaki; Editing by Chang-Ran Kim)