What is the Bank of Japan monetary policy meeting?

The Bank of Japan’s monetary policy meeting (MPM) is a regular session held by the bank’s Policy Board, in which the official interest rates and other monetary policies for the country are chosen in response to the latest economic developments.

The board’s aim is to choose policies that will achieve ‘price stability’ across Japan, which it defines as a year-on-year increase of 2% in the consumer price index (CPI).

When is the next BoJ monetary policy announcement?

The Policy Board’s next monetary policy meeting is scheduled for 23 - 24 January 2025.

The decisions made are announced via a press release a few hours after the meeting ends – usually sometime between 2.45 and 5.00am (UK time) – with the bank’s governor generally holding a press conference later that same day.

See a full calendar of upcoming monetary policy meetings

How does the BoJ monetary policy meeting affect traders?

MPMs set the official interest rates and other monetary policies for Japan. These measures are designed to influence spending across the economy and, in turn, inflation. The policies chosen can therefore affect demand for bonds, stocks, currency and other securities, creating opportunities for traders to profit from price movements.

What effect can monetary policy have on the markets?

Policies aimed at reducing spending, to lower inflation, may cause the price of stocks, bonds, indices (eg Japan 225) and other securities to fall, and the value of the yen to rise. Conversely, policies designed to stimulate spending to boost inflation – such as quantitative easing (QE) – may cause the price of these securities rise, and the value of the yen fall.

How does the BoJ influence inflation?

The Bank of Japan will attempt to raise or lower inflation by raising or lowering money supply. If it wants to bring inflation up to target, then its policies will be designed to increase the supply of money and spending across the economy. If it wants to bring inflation down it will implement policies that are designed to do the opposite.

The main way the BoJ attempts to influence inflation is by adjusting the interest rates it offers to financial institutions – including the rates it pays on deposits made with the bank and charges for loans. This then affects the interest rates offered by commercial banks to businesses and consumers, so higher rates can lead to increased saving, and lower borrowing and spending across the economy.

In recent years, the bank has pushed interest rates towards their lower limits in attempt to coax inflation towards target – a necessary measure after decades of low inflation and, in some years, deflation. However, with its policy tools having only limited success, the bank introduced a package of unconventional measures called ‘quantitative and qualitative monetary easing (QQE) with yield curve control’ in 2016. This includes:

Quantitative easing with yield curve control

Yield curve control is a policy through which the bank sets a target for the ‘long-term interest rate’ – the rate paid on 10-year Japanese government bonds (JGBs). To control this rate, the bank buys and sells JGBs on the open market through a quantitative easing programme, with the amount bought and sold adjusted over time to keep yields in line with the target.

The yield target for 10-year JGBs was set at 0% in September 2016, meaning the bank is aiming to drive prices to a level where these bonds will offer no return on investment. It hopes that this will encourage financial institutions to stay away from 10-year JGBs – and sell any of these bonds that they currently own – to free up capital for investment elsewhere. In theory, this should increase spending across the economy and cause inflation to rise.

Source: Bank of Japan

If the bank needs to reduce or slow the rate of inflation in the future, it could set a higher target rate and sell some of the bonds it has purchased.

The short-term policy interest rate

The short-term policy interest rate is the rate of interest paid on deposits held with the bank. The Policy Board decided to set a negative rate in January 2016, meaning financial institutions depositing funds with the bank actually lose money. Its aim is to encourage commercial banks to withdraw their funds to invest elsewhere, which it hopes will stimulate spending across the economy and cause inflation to rise. If the bank needs to slow or reduce inflation in the future, it may set this rate at 0% or higher.

Asset purchases (qualitative easing)

The bank also has an additional asset purchase programme, through which it buys exchange-traded funds (ETFs), Japan real estate investment trusts (J-REITs), commercial papers and corporate bonds.

This is the qualitative easing part of its stimulus package, and these assets are generally higher risk and less liquid than the JGBs bought under its quantitative easing programme. As before, the aim is to inject money directly into the economy to stimulate spending by businesses and, in turn, consumers.

The bank could reverse this policy by selling some of the assets purchased through the programme. This would tie up some of the capital held by financial institutions, leading to reduced inflation.

BoJ meeting calendar and release dates 2024

2024 committee members