Bank of Japan holds key rate at 1.25%

By Gokhan Ergocun

ISTANBUL (AA) - The Bank of Japan decided on Friday to keep its benchmark interest rate unchanged at around 1.25%, while approving a plan to more than double its annual sales pace of exchange-traded funds (ETF).

Following its two-day monetary policy meeting, the policy board voted 8-1 to encourage the uncollateralized overnight call rate to remain at approximately 1.25%, the central bank said in a statement.

Board member Hajime Takata dissented, proposing to raise the overnight call rate to around 1.5% on grounds that underlying inflation has reached the price stability target, but his proposal was defeated by a majority vote.

In a unanimous vote, policymakers decided to accelerate the pace of selling exchange-traded funds to about 860 billion yen ($5.46 billion) per year on a book value basis, up from the current pace of about 330 billion yen set in September 2025.

Converted to market value, the annual sales volume would amount to approximately 2.46 trillion yen, the bank noted.

The increased sales pace, which represents about 0.1% of stock market trading value, will take effect in January 2027.

The central bank noted that it has conducted ETF sales smoothly since January 2026 without disrupting markets, adding that expanding trading volume on the Tokyo Stock Exchange justified stepping up the pace.

The bank maintained its annual sales pace for Japan real estate investment trusts at about 5 billion yen on a book value basis.

Gökhan Ergöçün