- Prior decision
- Short-term interest rate target maintained at 0.50%
- Vote on policy rate was unanimous
- BOJ to reduce its monthly outright JGB purchases to about ¥2 trillion in January-March 2027
- The vote was a majority vote of 8-1; Tamura dissented saying the bank should allow long-term rates to be determined by the market and its participants
- The amount will be cut down by ~¥400 billion each calendar quarter until January-March 2026
- And then by ~¥200 billion each calendar quarter from April-June 2026
- Japan's economy has recovered moderately, although some weakness has been seen in part
- Japan's economic growth is likely to moderate amid slowdown in overseas economies and a decline in domestic corporate profits among other factors
- Underlying CPI inflation is likely to be sluggish, mainly due to the deceleration in the economy
- However, expected to increase gradually, since it is projected that a sense of labor shortage will grow as the economic growth rate rises
- There are various risks to the outlook
- 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
- Full statement
The overall decision is very much expected as the BOJ reaffirms its commitment to maintain stability and order in the JGB market. The slowdown in tapering is as expected and holds within the range of estimates of ¥200 billion to ¥300 billion mostly. So, no real surprises there.
At the balance, the statement also continues to highlight risks to the economic and price outlook. So, it doesn't seem like they're in much of a rush to push forward with the next rate hike. The can seems to be kicked down the road to January 2026 perhaps.
USD/JPY trades at 144.75 currently, pretty much flat on the day and little changed from the decision/statement.
