Bank of Japan Holds Rates, Moves to Start Selling ETFs

Tokyo — The Bank of Japan (BOJ) kept interest rates unchanged on Monday while announcing plans to begin selling its massive holdings of exchange-traded funds (ETFs), signaling a cautious step toward normalizing monetary policy.

At the end of its two-day meeting, the central bank said the benchmark short-term interest rate will remain steady, citing a need to balance inflationary pressures with fragile economic recovery signs. The BOJ also confirmed it will gradually unwind its stock market support by selling portions of its ETF portfolio, a program that has been in place for more than a decade.

Market Reaction

The yen held relatively firm following the announcement, while Tokyo stocks saw mixed movements. Investors had widely expected the bank to stand pat on rates, but the decision to begin ETF sales injected a note of caution into equity markets.

The BOJ remains the only major central bank still pursuing ultra-loose policy, even as the U.S. Federal Reserve and European Central Bank have signaled tightening or pauses after sharp hikes. Analysts say Monday’s decision reflects Japan’s careful approach in reducing extraordinary market support without derailing growth.

Looking Ahead

Officials said the pace and scale of ETF sales will depend on market conditions, with details to be communicated in future updates. The move is seen as a test of the BOJ’s ability to shift policy while maintaining financial stability.