The Bank of Japan headquarters (top row C) is seen in Tokyo on December 19, 2023.
Kazuhiro Nogi | Afp | beautiful pictures
The Bank of Japan raised its benchmark interest rate to “around 0.25%” from its previous range of 0% to 0.1% and outlined plans to scale back its bond-buying program.
But the Bank of Japan said it expected real interest rates to remain “significantly negative”, adding that “accommodative financial conditions will continue to provide solid support for economic activity”.
The central bank forecast core inflation – which excludes fresh food prices – to reach 2.5% by the end of fiscal year 2024 and “around 2%” in fiscal years 2025 and 2026.
The BOJ said it will continue to raise policy rates and adjust the pace of monetary easing, provided the economic outlook is realized.
Japan’s fiscal year runs from April 1 to March 31, which means fiscal year 2024 will end in March 2025.
The Bank of Japan said it would reduce its monthly purchases of Japanese government bonds to about 3 trillion yen ($19.64 billion) a month in the first quarter through March 2026. As of the March announcement, the bank said its JGB purchases had amounted to about 6 trillion yen a month.
The BOJ added that the amount now planned to be cut by about 400 billion yen per quarter would reduce total JGB holdings to around 7% to 8% by fiscal 2026. BOJ’s JGB holdings As of July 19, the figure now stands at a whopping 579 trillion yen, according to CNBC calculations.
However, the central bank stressed that it would be flexible in its plans and would conduct an interim review of the tapering plan at its June 2025 meeting.
“The bank will react quickly by, for example, increasing the amount of JGB purchases,” it said, adding that “the bank is ready to revise the plans at MPMs if necessary.”
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