BOJ keeps the policy rate at around 1.25%; annual ETF sales pace raised to about JPY 860 billionThe Bank of Japan kept the overnight lending rate at around 1.25%
At its Monetary Policy Meeting on October 30, the Bank of Japan decided by a vote of 8 to 1 to set the guideline for money market operations as encouraging the uncollateralized overnight call rate to remain at around 1.25 percent. It also decided unanimously to revise the annual pace of sales of its exchange-traded fund (ETF) holdings from about JPY 330 billion to about JPY 860 billion on a book-value basis, with implementation from January 2027.
Key points
- The guideline for money market operations until the next meeting is to encourage the uncollateralized overnight call rate to remain at around 1.25 percent (8 votes in favor, 1 against)
- Mr. Takata, who voted against, submitted a proposal to encourage the uncollateralized overnight call rate to remain at around 1.5 percent rather than around 1.25 percent, on the view that with underlying inflation having reached the price stability target, a new phase had begun in which the pace of moving closer to the neutral rate that allows flexible responses should be accelerated. The proposal was defeated by a majority vote
- The annual pace of ETF sales is revised from about JPY 330 billion to about JPY 860 billion on a book-value basis. The share of the sales in total trading value in the market as a whole will be about 0.1 percent, up from about 0.05 percent (unanimous)
- Implementation starts in January 2027. Depending on market and other conditions, the Bank may temporarily adjust or suspend the amount of sales within the annual pace (unchanged from the previous practice)
- The pace of J-REIT sales remains at about JPY 5 billion per year on a book-value basis
What to do in practice
- Check which reference rate your floating-rate borrowing contracts are linked to
- Review the interest rate assumed in your funding plan, on the basis that the around 1.25 percent guideline continues until the next meeting
At its meeting on October 30, the Bank of Japan decided to keep the interest rate that banks charge each other for overnight loans at around 1.25 percent. The decision was taken by a vote of the board members: 8 in favor and 1 against. The Bank also decided to increase the amount of stock bundles (ETFs) it sells each year.
Points
- The interest rate for overnight lending between banks will be kept at around 1.25 percent
- The decision was made by a vote, with 8 members in favor and 1 against
- The amount of ETFs sold each year will rise from about JPY 330 billion to about JPY 860 billion, starting in January 2027
What the words mean
- Uncollateralized overnight call rate
- The interest rate banks charge each other for lending money overnight without collateral. The Bank of Japan uses it as its benchmark
- ETF
- A product that bundles together the shares of many companies
- Bank of Japan: Bank of Japan, Statement on Monetary Policy (October 30, 2026)
- Bank of Japan: Bank of Japan, Decisions at Monetary Policy Meetings (2026)
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