BOJ raises interest rates, unveils plan to halve bond buying
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The news: The Bank of Japan raised interest rates and unveiled a plan to reduce its purchases of Japanese government bonds by half, surprising market watchers.
The numbers: The decision by Japan's central bank defied market expectations, as the BOJ's board voted 7-2 to raise the short-term policy rate to 0.25% from 0% to 0.1%. It was widely expected that the BOJ would wait until September or October for such a move.
The BOJ also unveiled a detailed quantitative tightening plan to roughly halve monthly bond buying from 6 trillion yen ($60.6 billion) to 3 trillion yen by between January and March 2026.
The context: The decision came amid rising expectations of cuts to interest rates by the US Federal Reserve, possibly as soon as September.
BOJ governor Kazuo Ueda said rates may be lifted further if the bank is convinced that rising wages will support services prices and keep inflation near its 2% target.
He noted that the BOJ would aim to take short-term rates to levels that neither cool nor stimulate growth in coming years if inflation is seen sustainably hitting 2%.
The BOJ ended negative rates and bond yield control in March in a landmark shift away from its radical stimulus programme.
The sources: Reuters, Bank of Japan media release
