BoJ watching 101: Economics and Rates

Research evidence excerpt

BoJ watching 101: Economics and Rates

y statement, Governor press conference, Outlook Report, Summary of Opinions,

Rinban operations 13

and minutes. The statement and press conference carry the near-term policy signal,

Securities Lending Facility (SLF) 14

while the Outlook Report and Summary of Opinions help markets read the Board’s

BoJ and FX interventions 14

assessment of inflation, risks, and the policy path. Speeches can be used to shape the

policy narrative or prepare the ground for policy shifts, while staff research provides Context 14

context on the analytical lenses the Bank wants markets to use. Mechanism 14

Trigger for FX interventions 16

Policy rate, balance sheet, and operations

Following the exit from yield curve control in 2024, the BoJ has returned to a rate-based

Izumi Devalier

framework, with the uncollateralized overnight call rate as the policy target. Balance- Japan Economist

sheet tools, including adjustments to JGB purchases and liquidity provision, are now BofASizumi.devalier@bofa.comJapan

operational, aimed at improving market functioning and ensuring JGB market stability Takayasu Kudo

rather than signaling the monetary policy stance. Rinban operations and the Securities Japan Economist

Lending Facility are now the main balance sheet tools for managing market conditions BofAStakayasu.kudo@bofa.comJapan

and the side effects of the large-scale asset purchases accumulated under QQE. Tomonobu Yamashita

Rates Strategist

The BoJ’s role in FX intervention BofAStomonobu.yamashita@bofa.comJapan

The authority to conduct FX intervention rests with the Minister of Finance, and Shusuke Yamada, CFA

exchange rate policy is set outside the monetary policy framework. The BoJ acts solely FX/Rates Strategist

as execution agent.