The BOJ raised its policy rate to a 31-year high of 1% and paused bond purchase reductions until April 2027, citing inflation risks.
The Bank of Japan increased its short-term policy rate to 1%, the highest level since 1995, marking its first hike since December 2025. The move reflects concerns over inflation potentially exceeding the 2% target, with real rates remaining negative in the near term.
The central bank also announced a pause in its bond purchase tapering program, fixing monthly Japanese government bond (JGB) purchases at around 2 trillion yen from April 2027. This decision, supported by a 7-1 board vote, removes upward pressure on long-term yields but raises questions about operational independence.
Markets are now assessing whether the upcoming press conference will signal further rate hikes, particularly in July. The BOJ’s explicit commitment to continued tightening contrasts with the dovish pause in bond tapering.