No Change in Japanese Central Bank Interest Rate… Again – Currency Thoughts
No Change in Japanese Central Bank Interest Rate… Again
June 17, 2025
The Bank of Japan’s short-term interest rate was yet again left at the very accommodative level of 0.50% that has been policy since a 25-basis point hike in January. This extended pause had been anticipated and was decided unanimously by the nine-person Board after five hours of discussion over two days. Core Japanese inflation (excluding fresh food but not energy) has been hovering around 3.5%, and expectations of inflation have risen moderately. But according to the BOJ released statement today, the Board worries that
It is extremely uncertain how trade and other policies in each jurisdiction will evolve and how overseas economic activity and prices will react to them. It is therefore necessary to pay due attention to the impact of these developments on financial and foreign exchange markets and on Japan’s economic activity and prices.
In a different respect related to balance sheet reduction, BOJ policy did get modified. It’s been announced that the JGB purchases by the central bank will be reduced by JPY 400 billion each quarter up to and during the first quarter of 2026 and then by JPY 200 billion over the ensuing four quarters. Following this predictable and gradual plan, the amount of outright Japanese government bond purchases will throttle back from JPY 4.1 trillion this quarter to JPY 2.1 billion by the first quarter of 2027.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of Japan
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