Japan Holds Rate As Expected; Set To Slow Bond Purchases

(RTTNews) - The Bank of Japan decided to maintain its interest rate and to reduce the pace of the amount of bond purchases from April next year amid rising uncertainties in financial markets and global trade policies.

The policy board of the Bank of Japan unanimously decided to hold the uncollateralized overnight call rate to remain at around 0.5 percent. The decision came in line with expectations.

Previously, the bank had raised the benchmark rate to the current level from 0.25 percent in January.

By an 8-1 majority vote, the board governed by Kazuo Ueda also decided to cut the amount of its monthly outright purchases of JGBs so that it will be about JPY 2 trillion in January-March 2027.

The amount will be cut by around JPY 400 billion each calendar year until January-March 2026, and by about JPY 200 billion each calendar quarter from April-June 2026. The bank said it will reduce its purchase amount of JGBs in a predictable manner, while allowing enough flexibility to support stability in the bond markets.

In case of a rapid rise in long-term interest rates, the board said it will make nimble responses such as increasing the amount of JGB purchases and conducting fixed-rate purchase operations of JGBs. Policymakers said they are prepared to amend the bond purchase reduction plan at the policy meeting, if deemed necessary.

Regarding various risks to outlook, the board observed that it is extremely uncertain how trade and other policies evolve and how overseas economic activity and prices react to them.