BOJ keeps policy rate unchanged at 1.25%, raises annual ETF sales pace to 860 billion yen

The Bank of Japan (BOJ) kept its key short-term interest rate unchanged at 1.25 per cent on Friday, while deciding to more than double the annual pace of selling its exchange-traded fund (ETF) holdings to 860 billion yen (USD 5.46 billion) from the earlier 330 billion yen (USD 2.09 billion).

The Bank of Japan (BOJ) kept its key short-term interest rate unchanged at 1.25 per cent on Friday, while deciding to more than double the annual pace of selling its exchange-traded fund (ETF) holdings to 860 billion yen (USD 5.46 billion) from the earlier 330 billion yen (USD 2.09 billion). The BOJ's Policy Board voted 8-1 to maintain the guideline for money market operations, keeping the uncollateralised overnight call rate at around 1.25 per cent.

Board member Hajime Takata dissented, proposing an increase in the rate to 1.5 per cent. He argued that underlying consumer price inflation had reached the central bank's price stability target and that the BOJ should accelerate the pace of bringing interest rates closer to the neutral level. His proposal was rejected by a majority vote. The decision comes after the US Federal Reserve also kept its benchmark interest rate unchanged at 3.75-4 per cent on Wednesday. The US central bank said inflation remained elevated, while economic activity continued to expand at a strong pace.

Alongside the rate decision, the central bank unanimously approved an increase in the pace of ETF sales. The revised annual sales target of 860 billion yen (USD 5.46 billion), on a book value basis, will take effect from January 2027. The BOJ said it had been selling ETFs smoothly since January 2026 without causing a major impact on the market, while trading volumes had expanded.

"Given these developments, at the MPM held today, the Bank decided to sell its ETF holdings at a scale of about 0.1 percent of the trading value in the market," the statement said. The revised pace compares with the earlier annual target of around 330 billion yen (USD 2.09 billion), which accounted for approximately 0.05 per cent of market trading value. At market value, the new annual sales amount would be around 2.46 trillion yen (USD 15.58 billion), the central bank said.

The BOJ added that it could temporarily adjust or suspend sales depending on financial market conditions, while remaining within the annual pace. Its annual sales of Japan real estate investment trusts (J-REITs) will remain unchanged at around 5 billion yen (USD 31.66 million) on a book value basis. The latest decision follows the BOJ's September rate increase of 25 basis points to 1.25 per cent from 1 per cent earlier, taking it to the highest level since 1995. (ANI)