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# Bank of Japan holds at 1.25% and more than doubles ETF sales to 860 billion yen a year
- URL: https://www.theglobalbanker.com/bank-of-japan-holds-at-1-25-and-more-than-doubles-etf-sales-to-860-billion-yen-a-year/
- Published: 2026-10-30T13:24:02.000Z
- Updated: 2026-10-30T13:24:02.000Z
- Description: The Bank of Japan kept its policy rate at 1.25% in an 8-1 vote on Friday, with one member seeking 1.5%, and will sell about 860 billion yen of ETFs a year from January 2027.
- Author: TGB Editorial Team
- Tags: Central Banks, Asia-Pacific, #newsroom, #needs-photo

The Bank of [Japan](https://www.theglobalbanker.com/market-japan/) kept its short-term policy rate at 1.25% on Friday in an 8-1 vote, with board member Hajime Takata calling for a rise to 1.5%, Reuters reported. The central bank revised up its inflation forecast and stressed again that it is ready to keep raising borrowing costs to head off mounting inflation risks, according to the agency.

The bank also decided to sell its exchange-traded fund (ETF) holdings faster. From January 2027 it will sell roughly 860 billion yen a year on a book value basis, about 0.1% of market trading value, up from about 330 billion yen, which would shorten the time needed to sell the holdings to about 43 years from around 112\. Governor Kazuo Ueda was due to explain the policy decision at a 3:30 p.m. news conference.

## A DISSENT FOR A FASTER RISE

Takata argued that with underlying consumer price inflation at the bank's 2% price stability target, the situation had moved into a new phase, and that the bank should speed up moving its policy rate closer to the neutral rate so that it can respond nimbly, according to investingLive.

Two board members who opposed September's rate rise had been seen as possible dissenters in favour of a cut, but the only dissent came from the hawkish side, investingLive reported. Markets were pricing about an 80% chance of a December rise going into the meeting. The bank's own guideline says it will encourage the uncollateralised overnight call rate to remain at around 1.25%.

## RATES AT THEIR HIGHEST SINCE 1995

The decision follows the bank's September increase of 25 basis points to 1.25% from 1%, which took the rate to its highest level since 1995.

Domestically licensed banks in Japan held 1,508.5 trillion yen of assets at end-July 2026, about half of it at city banks. [Mitsubishi UFJ Financial Group](https://www.theglobalbanker.com/rankings/) (MUFG), Sumitomo Mitsui Financial Group and Mizuho Financial Group are all global systemically important banks, while the regional tier comprised 97 banks at end-March 2026, many serving shrinking local economies, with 247 shinkin banks beneath them.

## INFLATION JUDGED IN LINE WITH TARGET

In its quarterly Outlook Report, the bank said underlying consumer price inflation is at a level broadly in line with the target and is expected to stay around there. It pointed to a persistent sense of labour shortage, the interaction between rising wages and prices, and medium- to long-term inflation expectations of about 2%, investingLive reported. The bank repeated that further rate rises and reductions in monetary accommodation are appropriate if its economic and inflation projections materialise, according to ActionForex.

The board's median forecast for core inflation, which excludes fresh food, rose to 2.6% for fiscal 2027 from 2.4%, reflecting the rise in crude oil prices since the summer. The fiscal 2026 forecast stayed at 2.5% and fiscal 2028 at 2.0%. The projections assume Dubai crude falls from around $105 a barrel to around $70 by the end of the forecast period.

The bank said ETF sales since January 2026 had gone smoothly without a major impact on the market while trading volumes expanded. At market value the new pace is around 2.46 trillion yen a year, and sales of Japanese real estate investment trusts stay at about 5 billion yen a year. In comments compiled by Reuters, Hirofumi Suzuki, chief FX strategist at SMBC in Tokyo, called the recognition that underlying inflation had reached 2% a significant shift, while Masahiko Loo of State Street Investment Management said cutting the unwind from 112 years to 43 years was substantial.

## THE TGB VIEW

Mitsubishi UFJ Financial Group ranks 10th in the TGB Bank Rankings, Sumitomo Mitsui Financial Group 17th and Mizuho Financial Group 19th, and Mizuho has the highest return on equity of the three at 11.0%, against 10.9% at Mitsubishi UFJ and 10.0% at Sumitomo Mitsui. It also carries the thinnest equity cushion, at 3.7% of assets against 4.8% at Sumitomo Mitsui and 5.2% at Mitsubishi UFJ. The next date to watch is the Bank of Japan's monetary policy meeting on 17 and 18 December.

*Related: [Bank of Japan set to hold at 1.25% while signalling a possible December hike](https://www.theglobalbanker.com/bank-of-japan-set-to-hold-at-1-25-while-signalling-a-possible-december-hike/)*