The Bank of Japan maintained its policy rate at “around 0.5%” and announced an adjustment in its plan to gradually reduce its Japanese government bond (JGB) purchases, aiming to bring monthly purchases down to ¥2 trillion by Q1 2027.

• The tapering plan will cut purchases by ¥400B per quarter through Q1 2026 (part of the existing plan decided in July 2024), then by ¥200B per quarter through Q1 2027.
• Core CPI (ex fresh food) is running at around 3.5% YoY, with inflation driven by wage pass-through and rising food and import prices.
• The BoJ expects underlying inflation to slow near term but rise gradually later as labor shortages and inflation expectations build.
• Japan’s economy is recovering moderately, though consumer sentiment remains soft and housing investment is weak.
• The BoJ warned that risks remain high due to global trade policy shifts and their impact on markets and domestic activity.