Summary of Staff Reports on Economic and Financial Developments

Market Operations in the Intermeeting Period

• The BoJ maintained the uncollateralized overnight call rate near 0.5%, operating per the January 2025 policy guidelines.
• Monthly JGB purchases totaled approximately ¥4.5 trillion, in line with the reduction plan.
• Purchases of CP and corporate bonds ended after January, following prior policy decisions.
• Overnight call and GC repo rates hovered around 0.5%.
• TOPIX was stable, weighed by trade policy concerns but supported by strong corporate earnings.
• 10-year JGB yields rose due to improved economic indicators and shifting rate expectations.
• The yen appreciated against the USD due to narrowing yield differentials; largely flat vs. the euro.
• Bond market functioning improved; DI reached levels last seen in 2015.

Overseas Economic and Financial Developments

• Global growth remained moderate.
• Key uncertainties: global trade policy, Chinese economy, geopolitical risks.
• Financial conditions:

Economic and Financial Developments in Japan

• Japan’s economy recovered moderately and is expected to grow above potential.
• Exports and industrial production were flat but projected to rebound with global IT demand.
• Corporate profits improved; capex continued increasing on accommodative conditions.
• Private consumption rose moderately despite price pressures; sentiment softened due to food inflation.
• Employment and wages showed steady improvement. Nominal wages and employee income rose.
• CPI inflation (ex-fresh food) stood at 3.0–3.5% YoY. Underlying inflation expected to rise gradually.
• Inflation pressures include wage growth, energy subsidy reductions, and higher rice prices.
• Conditions remained accommodative despite rising funding costs.
• Bank lending and corporate bond issuance rose ~3.5% YoY.
• Money stock growth was in the 1.0–1.5% YoY range.
• Bank lending attitudes stayed favorable; bankruptcies increased more slowly.

Summary of Discussions by the Policy Board on Economic and Financial Developments

Economic and Price Developments

• Members agreed on moderate global growth but rising uncertainty due to U.S. tariff policy and geopolitical shifts.
• U.S.: Baseline outlook positive; some policy-linked downside risks identified (e.g., fiscal cuts, tariffs).
• Europe: Weakness noted, especially in Germany and France; cost pressures hurt competitiveness.
• China: Growth losing steam; real estate drag continues; risks skewed to the downside.
• Members were cautious about the unclear impacts of tariff frameworks to be revealed in April.
• Japan's domestic outlook:
• Price dynamics:
• Risks flagged:

Financial Developments

• Funding conditions for most firms remained favorable.
• Concerns raised for micro-sized firms facing rising borrowing costs.
• Long-term rates still seen as low relative to expected returns, thus not constraining investment.

Summary of Discussions on Monetary Policy

• The BoJ unanimously maintained its operational guideline to keep the call rate around 0.5%.
• Forward guidance:
• Mixed views on timing for future hikes:
• U.S. policy (especially tariffs) and potential downside to Japan’s economy were top concerns.
• Communication strategy:
• Market operations:
• JGB purchase plan: