MNI BoJ Review – March 2025: On Hold Amid Uncertainty

EXECUTIVE SUMMARY: 

• The Bank of Japan (BoJ) kept its policy rate unchanged at 0.50% during its recent monetary policy meeting, a decision that was widely expected by market consensus. The 9-0 vote indicated strong unanimity among policymakers, with no serious consideration given to a consecutive rate hike following the January increase.
• Despite keeping rates steady, the BoJ’s policy statement maintained a hawkish tone. The central bank reiterated its optimistic outlook, stating that Japan’s economy is expected to grow above its potential rate as global economic conditions remain stable. It also noted that a strengthening cycle of income and spending, supported by accommodative financial conditions, should continue.
• The BoJ remains on a steady, cautious path toward policy normalisation, balancing inflation risks with economic growth stability. While another rate hike is expected in July, external factors such as yen depreciation, political developments, and global trade risks could shift the timing.
• The BoJ’s balance sheet strategy was also a key focus at the meeting. The central bank plans to review this QT plan in June, assessing whether to continue reducing JGB purchases as planned.
• Following this meeting, the BoJ’s policy board will see a change in its composition. Seiji Adachi will step down on March 25 after completing his five-year term. Junko Koeda, an economics professor at Waseda University, will assume the role.

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