The Bank of Japan (BOJ) announced on Tuesday its decision to keep its benchmark short-term interest rate steady at around 0.5%, while outlining a gradual reduction plan for its government bond purchases amid global trade uncertainty.

Key Policy Decisions:

• Interest Rates: Unchanged at ~0.5% (maintained since January 2024)

• Bond Purchase Tapering:

  • Until March 2026: Reduce by ¥400 billion (~$2.8 billion) quarterly

  • From April 2026: Slow cuts to ¥200 billion (~$1.4 billion) quarterly

• Rationale: Cautious approach due to heightened U.S. tariff risks under Trump administration

Governor Ueda's Statement:

"The Policy Board unanimously agreed to maintain current accommodative stance while adjusting our bond market operations to ensure smooth policy transition."

Economic Context:

• Revised downward 2024 GDP growth forecast (now 0.8%)

• Core inflation remains at 2.2%, but wage growth still muted

• Yen trades near 160 per USD, raising import cost concerns