BOJ's Bond Holding Paper Losses Hit Record After Rate Hikes
The paper losses from government bonds tripled from the previous year to ¥28.6 trillion ($198 billion) at the end of the fiscal year 2024, according to the central bank's financial statement released Wednesday.
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BOJ Stands Pat, Lifts Price View in Sign of Progress Toward Hike
(Bloomberg) -- The Bank of Japan held its benchmark rate steady and raised its inflation views more than expected in a sign it may be closer to its next rate hike, while keeping options open by warning it's still assessing the impact of President Donald Trump's tariffs. The World's Data Center Capital Has Residents Surrounded An Abandoned Art-Deco Landmark in Buffalo Awaits Revival Budapest's Most Historic Site Gets a Controversial Rebuild San Francisco in Talks With Vanderbilt for Downtown Campus We Should All Be Biking Along the Beach The BOJ kept the overnight call rate at 0.5% at the end of a two-day policy meeting in a unanimous vote, according to a statement Thursday. All 56 surveyed economists forecast the decision. The nine-member board boosted its median inflation projection for the current fiscal year to 2.7% from 2.2% in its quarterly economic outlook report, reflecting persistent increases in food prices. It also slightly raised its forecasts for fiscal year 2026 and 2027, while bringing up its economic growth view a tad for this year. Economists had expected a shift to 2.5% for the current year's inflation forecast, and no change to other years. While the array of changes in the outlook suggested Governor Kazuo Ueda's board is closer to its next rate hike, the central bank also avoided dropping any clear hints as to the timing. Officials likely need time to gauge how US tariffs will affect Japan's economy and global commerce, even after a deal was struck between the US and Japan that's reduced some of the economic uncertainty hanging over Japan. Markets took the BOJ's decision in stride. The yen extended gains slightly against the dollar in the immediate aftermath of the decision and then oscillated in a relatively narrow range as Ueda spoke. Stocks closed higher, with little discernible impact from the decision. Japanese government bond futures swung from a small loss to a small gain. 'The BOJ's upward revision of its price outlook does make it seem like a rate hike is coming closer,' said Hiroki Shimazu, chief strategist at MCP Asset Management. 'At the same time, in the latest outlook report, the bank is also talking about an expected slowdown.' Those issues are key for markets, with the yen hovering near its weakest since early April and within easy reach of the psychological level of 150 to the dollar. Meanwhile, bond yields have been pushing higher in recent months, with the moves in longer-maturity debt spilling over into global markets. The BOJ gathering concluded just hours after the Federal Reserve kept its benchmark interest rate steady with Chair Jerome Powell, citing 'many, many uncertainties' impeding a move as Governors Christopher Waller and Michelle Bowman dissented by voting for a quarter-point cut. Powell tempered expectations for a rate cut in September. What Bloomberg Economics Says... 'The Bank of Japan's decision to stand pat Thursday was in line with our view that it's taking a cautious stance as it assesses the impact of US tariffs on exports. It likely also wanted to avoid making political waves with an increase in borrowing costs at a time when the government has been weakened further by a setback in the upper house election.' — Taro Kimura, economist Click here to read the full report The BOJ revised its assessment of the risk balance for inflation in its outlook report by saying risks were generally balanced. It only cited downside risks for fiscal years 2025 and 2026 in the report three months ago. That's another sign the board is looking at the potential case for higher rates down the road. The BOJ also softened its characterization of uncertainty over trade in the report summary to show it's no longer 'extremely' high, and reiterated its intention to raise rates if conditions allow. 'There have been positive developments in trade and other policies, such as negotiations between Japan and the United States resulting in an agreement,' the report said. Japan's government struck a trade deal with Washington on July 22 that will lower tariffs on US imports of Japanese autos and most other goods to 15%. Provided there's no change to the levies, BOJ officials expect they will have enough data by at least year-end to be able to consider whether a rate hike would be appropriate, people familiar with the matter told Bloomberg earlier this month. The BOJ's upgrade to the inflation outlook comes as persistently high living costs have made Japan among the most inflationary nations in the Group of Seven. Rising prices for food, especially rice, have driven the gains, compelling the bank to examine that impact on underlying inflation trends. 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'The BOJ wants to assess how tariff impacts will affect Japanese corporate profits, as well as investment and wage hike trends, so I think they will make the move in December.' --With assistance from Brett Miller, Paul Jackson, Yoshiaki Nohara and Erica Yokoyama. (Updates with market moves as Ueda speaks.) Russia Builds a New Web Around Kremlin's Handpicked Super App Burning Man Is Burning Through Cash It's Not Just Tokyo and Kyoto: Tourists Descend on Rural Japan Everyone Loves to Hate Wind Power. Scotland Found a Way to Make It Pay Off Cage-Free Eggs Are Booming in the US, Despite Cost and Trump's Efforts ©2025 Bloomberg L.P. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
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