The Bank of Japan left its short-term interest rate unchanged at 0.5% and unanimously maintained the existing bond purchase reduction schedule through March 2026.
JGB Bond Purchases
The BoJ also announced a new government bond purchasing policy. Starting in April 2026, the Bank will slow the pace of quantitative tightening (QT) by reducing quarterly JGB purchases by ¥200 billion. Under this plan, monthly purchases will decline to around ¥2 trillion by March 2027. The new strategy signals a preference for transparency and stability. According to Governor Kazuo Ueda, these actions are appropriate given emerging risks such as U.S. tariffs and Middle East escalation.
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At the post-meeting press conference, Governor Ueda adopted a cautious tone. He warned that “extremely high uncertainty” related to global trade policy and geopolitics could weigh on both economic growth and inflation. Ueda emphasized that any further rate hikes would depend on “hard data.” Core inflation may remain near 2%. The governor also assured of a “swift response” in the event of a spike in long-term bond yields, arguing that the slower pace of QT is aimed at avoiding destabilization in already volatile super-long bond markets.
Market Reaction
The market reaction was muted. Yields on 10-year Japanese government bonds rose slightly, while the yen remained stable, reflecting correct market expectations. These limited moves highlight that investors view today’s decisions more as a strategic adjustment than the start of a new direction.
Source: xStation 5
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