BOJ Says No to Interest Hikes Amid Unstable Markets

• The Japanese Yen extends its losses against the US Dollar, leading the Bank of Japan not to raise rates when markets are unstable.
• Japan’s benchmark Nikkei 225 stock index jumped by 10.2%.

The Bank of Japan (BOJ) confirmed today that they will not raise interest rates amid turbulent financial and capital markets. Deputy Governor of BOJ, Shinichi Uchida stated the need of maintaining monetary easing with the current policy interest rate in a meeting in Japan. 

The Japanese yen continued its losses against the US dollar; this downfall could be the major concern behind Uchida’s confirmation. Thus, unlike the U.S. and Europe, the BOJ didn’t mention about the future plans of implementing rate cuts.

Significantly, the Deputy Governor emphasized the influence of stock market’s volatility on  corporate activities and consumption and subsequently on the central bank’s decision-making process. Due to observing high volatility in domestic and overseas financial markets, he also affirms the need to maintain the current levels of monetary easing.

The BOJ’s interest rate would change if market volatility affected its price, the economy, and the achievement of the 2% inflation target. Moreover, Japan’s benchmark Nikkei 225 stock index jumped by 10.2%, or 3,217 points, in its biggest one-day point gain after yesterday’s drop. Similarly, stock markets in Taiwan and South Korea rebounded, rising around 3.5% after record falls.

BOJ’s Plans to Raise Interest Rate

At the end of July, the Bank of Japan decided to raise the overnight call rate target and Japan’s benchmark short-term lending rate around 0.25 pct from a range of zero to 0.1 pct. The short-term policy rate is now the highest since 2008. 

Whereas, only 26% of market players expected a rate rise, as per a survey of 181 bond investors conducted by Nikkei affiliate QUICK on July 23–25. However, investors are expecting a rate hike either in September or October.

The Bank of Japan Policy Board uniformly decided to shorten the monthly pace of its Japanese government bond purchases, which will be about 3 trillion yen in January–March 2026, down from 6 trillion yen. Furthermore, the BOJ will conduct an interim assessment of the plan at its monetary policy meeting in June 2025. 

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