BoJ Holds Rates, Begins ETF and REIT Sales

The Bank of Japan kept its benchmark short-term rate unchanged at 0.5% in September 2025, maintaining borrowing costs at their highest level since 2008 and matching market expectations. The decision, passed by a 7-2 vote, came amid uncertainty over Japan’s political outlook and the impact of U.S. tariffs. It followed the U.S. Fed’s rate cut earlier this week—its first since December. During Friday's meeting, the BoJ announced it would begin selling its holdings of exchange-traded funds (ETFs) and real-estate investment trusts (REITs). The board noted Japan’s economy had recovered moderately despite some weakness. Private consumption was resilient, helped by improving employment and income. Exports and industrial output remained subdued, with front-loading ahead of U.S. tariff hikes and a subsequent pullback. Inflation has ranged between 2.5% and 3.0%, fueled by higher food costs, particularly rice. Inflation expectations rose moderately, with underlying CPI projected to rise gradually.