Bank of Japan Raises Policy Rate to 0.25% and Sets Plan to Halve JGB Purchases

The Bank of Japan raised its overnight policy rate to 0.25% on Wednesday, the highest level since 2008.

The decision was taken by a 7-2 majority of the BOJ's policy board. Governor Kazuo Ueda, speaking after the decision, did not rule out further rate increases.

RATE PATH SINCE 2008

The move takes the rate from a range of 0% to 0.1% to around 0.25%. Rates were last this high in 2008, before the financial crisis prompted the BOJ to push rates back towards zero, where they remained — including negative rates of -0.1% from 2016 to March 2024 — for many years.

The two dissenting members, Toyoaki Nakamura and Asahi Noguchi, argued that the decision should wait until more data on the economy and on the effects of wage increases had been assessed.

JGB PURCHASE REDUCTION PLAN

Alongside the rate decision, the BOJ confirmed a plan for reducing its purchases of Japanese government bonds. Monthly JGB purchases are to be reduced progressively, with a target of approximately ¥3 trillion per month by the January to March 2026 quarter, roughly half of current purchase volumes.