The Bank of Japan on Thursday kept its benchmark interest rate steady at 0.25%, opting to take time to assess the impact of financial and exchange markets on Japan's economic activity and prices.

the yen weakened 0.3% against the dollar after the rate decision, trading at 155.42 and hitting a one-month low. Meanwhile, of the country Nikkei 225 decreased by 0.85%.

The decision to keep rates on hold surprised economists polled by Reuters, who had expected a 25 basis point hike. Stateside, the US Federal Reserve on Wednesday cut rates by 25 basis pointswhich brings the federal funds rate to 4.25%-4.5%.

The BOJ said in its statement that the decision to hold was an 8-1 split decision, with board member Naoki Tamura in favor of an increase of 25 basis points.

The central bank noted, however, that "there are still high uncertainties surrounding Japan's economic activity and prices."

"In particular, with firms' behavior shifting more towards increasing wages and prices recently, exchange rate developments are, compared to the past, more likely to affect prices," the bank added.

Analysts at investment bank Credit Agricole Securities Asia said the decision to leave rates unchanged was due to the BOJ's inability to overcome government opposition to a third rate hike amid growing concerns that real GDP growth will be negative in 2024.

Japan's GDP saw a year-on-year contraction for the first two quarters of this year, registering only a 0.5% increase in the quarter ending in September.

The BOJ's decision was in line with a CNBC poll, which showed that 13 out of 24 economists expected the BOJ to keep its key interest rate unchanged in December before raising the rate at the next meeting in January.

The survey was conducted between December 9 and 13, before the Fed indicated that there will be fewer rate cuts in 2025.

The BOJ "will resume its tightening cycle before long," said Marcel Thieliant, head of Asia-Pacific at Capital Economics in a statement after the decision. Capital Economics expects a rise in January after a new set of economic forecasts come in.

Thieliant added that "it should be noted that, unlike in October, the decision to leave rates suspended was not unanimous," pointing to Tamura's vote to raise rates to 0.5%.

Recent economic data from Japan still currently supports the case for a rate hike. Core inflation in October came in at 2.3%the 30th straight month that inflation has crossed the 2% target of the BOJ. November inflation data will come in on Friday.

Business sentiment among large companies in Japan also came in higher than expected in the the latest BOJ Tankan surveywith the index for large manufacturing firms rising to 14 in the quarter ending in December, up from 13 in the September quarter and beating the 12 expected by economists polled by Reuters.

The index tracks business sentiment in the country among large companies and contributes to the BOJ's considerations when forming monetary policy. A higher figure means that optimists are greater than pessimists, and vice versa.

In a December 13 note, analysts from Bank of America said that the December Tankan survey indicates that Japan's economy remains resilient.

They added that "this also confirms that the economy and inflation are trending in line with the BoJ's base case scenario (which is its prerequisite for raising interest rates)."

However, this does not mean that the need for a rate hike is urgent. Analysts said imported inflationary pressure is easing, while companies' medium-term inflation expectations remain stable despite the imminent start of President-elect Donald Trump's administration and the risk of tariffs of trade.