| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| Change | 0bp | 0bp to 0bp | 0bp | 0bp |
| Level | 0.5% | 0.5% to 0.5% | 0.5% | 0.5% |
Highlights
All of the key decisions and assessments by the board were widely expected:
--The Bank of Japan's nine-member board voted unanimously to maintain the target for the overnight interest rate at 0.5% for the third straight meeting after hiking it by 25 basis points (0.25 percentage point) in January amid uncertainty over the trade war and heightened geopolitical risk.
--The bank didn't say it will continue raising rates if growth and inflation evolve in line with its medium-term outlook but it is still in the process of normalizing its monetary policy stance from years of keeping short-term rates near zero percent. It repeated its latest outlook that underlying CPI inflation (still around 1.5%) is likely to settle around the bank's 2% target in the second half of the projection period (fiscal 2025 through fiscal 2027).
--The board decided in an 8 to 1 vote to moderate the JGB purchase reduction pace to by about ¥200 billion a quarter in fiscal 2026 starting in April from by about ¥400 billion now, which will reduce the pace of its JGB buying to around ¥2.1 trillion in January-March 2027 from about ¥4.1 trillion in January-March 2027.
--Board member Naoki Tamura, a former SMBC banking group executive, called for the same tapering pace of ¥400 billion every quarter into the next fiscal year, arguing that the bank should let markets forces set long-term rates.
--The decision is aimed at striking a fine balance between the need to shrink its balance sheet and the need to prevent the lower debt holdings by the central bank from jacking up long-term market interest rates.
--The board maintained the slowing pace of Japanese government bond purchases by about ¥400 billion a quarter for the current fiscal year ending in March 2026 in line with its July 2024 decision to taper JGB buying to around ¥3 trillion in the January-March quarter of 2026 from about ¥6 trillion then (to ¥2.9 trillion from ¥5.7 trillion, to be more precise).
--The BOJ repeated its mantra: Long-term interest rates should be formed in financial markets in principle; it is appropriate to trim its JGB purchases 'in a predictable manner while allowing enough flexibility to support stability in the JGB markets.
--The Bank of Japan's nine-member board voted unanimously to maintain the target for the overnight interest rate at 0.5% for the third straight meeting after hiking it by 25 basis points (0.25 percentage point) in January amid uncertainty over the trade war and heightened geopolitical risk.
--The bank didn't say it will continue raising rates if growth and inflation evolve in line with its medium-term outlook but it is still in the process of normalizing its monetary policy stance from years of keeping short-term rates near zero percent. It repeated its latest outlook that underlying CPI inflation (still around 1.5%) is likely to settle around the bank's 2% target in the second half of the projection period (fiscal 2025 through fiscal 2027).
--The board decided in an 8 to 1 vote to moderate the JGB purchase reduction pace to by about ¥200 billion a quarter in fiscal 2026 starting in April from by about ¥400 billion now, which will reduce the pace of its JGB buying to around ¥2.1 trillion in January-March 2027 from about ¥4.1 trillion in January-March 2027.
--Board member Naoki Tamura, a former SMBC banking group executive, called for the same tapering pace of ¥400 billion every quarter into the next fiscal year, arguing that the bank should let markets forces set long-term rates.
--The decision is aimed at striking a fine balance between the need to shrink its balance sheet and the need to prevent the lower debt holdings by the central bank from jacking up long-term market interest rates.
--The board maintained the slowing pace of Japanese government bond purchases by about ¥400 billion a quarter for the current fiscal year ending in March 2026 in line with its July 2024 decision to taper JGB buying to around ¥3 trillion in the January-March quarter of 2026 from about ¥6 trillion then (to ¥2.9 trillion from ¥5.7 trillion, to be more precise).
--The BOJ repeated its mantra: Long-term interest rates should be formed in financial markets in principle; it is appropriate to trim its JGB purchases 'in a predictable manner while allowing enough flexibility to support stability in the JGB markets.
Market Consensus Before Announcement
--The Bank of Japan's nine-member board is widely expected to vote unanimously to maintain the target for the overnight interest rate at 0.5% for the third straight meeting amid uncertainty over the trade war and heightened geopolitical risk.
--Governor Kazuo Ueda is expected to repeat that the bank will continue raising rates “gradually” as part of its policy normalization process.
--The board is likely to maintain the slowing pace of asset purchases by ¥400 billion a quarter for the current fiscal year ending in March 2026.
--The focus is on how fast it should reduce the scale of its purchases of Japanese government bonds in fiscal 2026 starting in April 2026; the bank is expected to moderate the reduction pace to strike a fine balance between the need to shrink its balance sheet and the need to prevent the lower debt holdings by the central bank from jacking up long-term market interest rates.
--Governor Kazuo Ueda is expected to repeat that the bank will continue raising rates “gradually” as part of its policy normalization process.
--The board is likely to maintain the slowing pace of asset purchases by ¥400 billion a quarter for the current fiscal year ending in March 2026.
--The focus is on how fast it should reduce the scale of its purchases of Japanese government bonds in fiscal 2026 starting in April 2026; the bank is expected to moderate the reduction pace to strike a fine balance between the need to shrink its balance sheet and the need to prevent the lower debt holdings by the central bank from jacking up long-term market interest rates.
Definition
The Bank of Japan is the central bank of Japan. The Bank of Japan Act states that the bank's monetary policy should be aimed at"achieving price stability, thereby contributing to the sound development of the national economy." The nine-member policy board reviews economic conditions at home and abroad before making a policy decision. There is no specific time for the announcement. The board holds eight two-day Monetary Policy Meetings a year, in January, March, April, June, July, September, October and December. At each meeting, the board votes on the proposals on the bank’s monetary policy stance and the basic guideline on how to achieve the policy target submitted by the chair of the board, who is the bank governor.
Description
The announcement of the bank’s monetary policy decision after each meeting can cause a market reaction, even when there is no change to the policy stance. Markets tend to look ahead toward a policy shift, pricing in a change to the bank’s targets for overnight and long-term interest rates, the pace of financial asset purchases or the scale of market operations.
Market participants closely monitor the news conference by the BoJ governor that usually starts at 1530 JST (0130 EST/0230 EDT/0630 GMT), a few hours after the bank releases its policy decision. Comments from the governor could provide clues to what the bank may or may not do in the near term, which in turn could trigger buying or selling of the yen against the dollar.
Since April 2023, the bank has been conducting a"broad-perspective review" of the costs and benefits of its various monetary easing measures implemented in the past 25 years. The negative overnight interest rate target introduced in January 2016 has been unpopular among lenders as it squeezes their profit margins.
Market participants closely monitor the news conference by the BoJ governor that usually starts at 1530 JST (0130 EST/0230 EDT/0630 GMT), a few hours after the bank releases its policy decision. Comments from the governor could provide clues to what the bank may or may not do in the near term, which in turn could trigger buying or selling of the yen against the dollar.
Since April 2023, the bank has been conducting a"broad-perspective review" of the costs and benefits of its various monetary easing measures implemented in the past 25 years. The negative overnight interest rate target introduced in January 2016 has been unpopular among lenders as it squeezes their profit margins.
