Archive: Bank of Japan headquarters, Tokyo. Fg2 / Wikimedia Commons, public domain, cropped.
The Bank of Japan held its policy interest rate at 1.25% on Friday while deciding to accelerate sales of its stock-market holdings, as the central bank said underlying inflation was now broadly in line with its 2% target.
The decision leaves borrowing costs unchanged but advances a separate part of the bank’s retreat from extraordinary monetary support. The annual pace of exchange-traded fund sales will rise to about 860 billion yen from about 330 billion yen, measured at book value, beginning in January 2027.
Eight members back the rate hold
The Policy Board voted 8-1 to keep the uncollateralized overnight call rate at around 1.25%, according to its October 30 policy statement.
Board member Hajime Takata dissented, proposing a rate of around 1.5%. He argued that underlying consumer-price inflation had reached the bank’s target and that monetary policy had entered a phase requiring a faster move toward the neutral interest rate. His proposal was defeated.
The bank’s inflation and outlook reference document said underlying consumer-price inflation was at a level “generally consistent” with the 2% price-stability target and was expected to remain around that level.
It said a mechanism in which wages and prices rise moderately together was operating amid persistent labor shortages. Medium- to long-term inflation expectations were around 2%, the bank said.
Faster sales of stock-market funds
The decision to increase ETF sales was unanimous. The bank said sales that began in January 2026 had proceeded smoothly without a major market impact, while stock-market trading had expanded.
The new pace will represent about 0.1% of market trading value, up from about 0.05%. The central bank’s separate ETF reference document puts the new annual sales pace at about 2.46 trillion yen when converted to market value using the market-to-book ratio of ETFs sold during January through September.
The 860 billion yen figure is book value, not the cash proceeds the bank expects from selling the funds. The bank retained the ability to adjust or suspend sales in response to financial-market conditions. Sales of Japanese real estate investment trusts will remain at about 5 billion yen a year at book value.
Inflation risks remain tilted upward
The bank raised its fiscal 2027 forecast for consumer-price inflation excluding fresh food to 2.6%, up 0.2 percentage point from July. Its fiscal 2026 forecast remained 2.5%, while the fiscal 2028 projection remained 2.0%.
The outlook identified the Middle East situation, artificial-intelligence demand and foreign-exchange developments as risks. It judged risks to economic activity as broadly balanced and risks to prices as tilted upward.
JBizNews Desk | Global Markets
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