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Semiannual Report on Currency and Monetary Control (Summary)
First Half of Fiscal 2025 (April-September 2025)

-- The semiannual report was submitted to the Diet in December 2025.

Bank of Japan

Economic Developments

  1. During the period from April through September 2025, Japan's economy had recovered moderately, although some weakness had been seen in part.

    Exports and industrial production had continued to be more or less flat as a trend, although there had been some front-loading and a subsequent reactionary decline, due to the increase in U.S. tariffs. Corporate profits had remained at high levels on the whole, although downward effects due to tariffs had been seen in manufacturing, and business sentiment had stayed at a favorable level. In this situation, business fixed investment had followed a moderate increasing trend. Private consumption had been resilient against the background of an improvement in the employment and income situation, despite weakness in consumer sentiment due to the impact of price rises and other factors. On the other hand, housing investment had declined. Meanwhile, public investment had continued to be more or less flat.

  1. Regarding price developments, the year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) had been at around 3.5 percent in the first half of the April-September period, with moves to pass on wage increases to selling prices continuing and due to the effects of the rise in food prices, such as rice prices, and other factors, and then declined to around 3 percent in the second half of the April-September period. Inflation expectations had continued to rise moderately.

Developments in Financial Markets and Conditions

  1. In global financial markets, market sentiment had become significantly cautious at the beginning of April, reflecting heightened uncertainties regarding the course of trade and other policies in each jurisdiction and the impact of these policies. Thereafter, despite continued attention to such uncertainties over the global economy, market sentiment had improved, on the back of factors such as progress in trade policy negotiations between jurisdictions.
  1. In the money market, the uncollateralized overnight call rate had been at around 0.5 percent.

    With regard to developments in the bond market, 10-year Japanese government bond (JGB) yields had increased over the April-September period; they had declined significantly at the beginning of April, due mainly to the rise in investors' risk aversion, reflecting heightened uncertainties regarding trade policy in each jurisdiction; subsequently, yields had increased, mainly reflecting a rise in interest rates in the United States and Europe due to the improvement in market sentiment, as well as market views on the Bank's future monetary policy reflecting the agreement in tariff negotiations between Japan and the United States and other factors.

    The Nikkei 225 Stock Average had increased significantly over the April-September period; it had fallen substantially at the beginning of April, with a deterioration in market sentiment; thereafter, it had moved in tandem with the rise in U.S. stock prices and had increased significantly, mainly reflecting the agreement in tariff negotiations between Japan and the United States in late July. It was in the range of 44,000-45,000 yen at the end of September.

    In the foreign exchange market, the yen had been more or less unchanged against the dollar over the April-September period; while the yen had appreciated against the U.S. dollar in April, it then depreciated moderately. The U.S. dollar was in the range of 148-149 yen at the end of September. The yen had depreciated against the euro.

  1. With regard to corporate financing, firms' funding costs had increased. Demand for funds had continued to increase moderately on the back of, for example, a recovery in economic activity as well as mergers and acquisitions of firms. In terms of supply of funds, financial institutions' lending attitudes as perceived by firms had remained accommodative. In this situation, the year-on-year rate of increase in the amount outstanding of private bank lending had been in the range of around 2.5-4.5 percent. The year-on-year rate of increase in the aggregate amount outstanding of CP and corporate bonds had been in the range of around 3.5-8.0 percent, partly due to large-scale issuances.
  1. The year-on-year rate of decline in the monetary base (currency in circulation plus current account balances at the Bank) had accelerated, with a decline in the purchase amount of JGBs and in loan disbursements under the Fund-Provisioning Measure to Stimulate Bank Lending. The year-on-year rate of change in the money stock (M2) had been in the range of around 0.5-1.5 percent.

Monetary Policy Meetings (MPMs)

  1. Four MPMs were held in the first half of fiscal 2025.

    The Policy Board made the following judgment on economic and financial developments at all the MPMs held during the period: "Japan's economy has recovered moderately, although some weakness has been seen in part."

  1. In the conduct of monetary policy, the Policy Board decided at all the MPMs held in the first half of fiscal 2025 to maintain the following guideline for money market operations.

    The Bank will encourage the uncollateralized overnight call rate to remain at around 0.5 percent.

    At the June MPM, regarding the reduction of the purchase amount of JGBs, the Policy Board decided on the following plan to reduce the amount of the Bank's monthly outright purchases of JGBs so that it would be about 2 trillion yen in January-March 2027. The amount would be cut down, in principle, by about 400 billion yen each calendar quarter until January-March 2026, and by about 200 billion yen each calendar quarter from April-June 2026.

    1. (1) The Bank will reduce the planned amount of its monthly purchases of JGBs so that it will be about 2 trillion yen in January-March 2027. The amount will be cut down, in principle, by about 400 billion yen each calendar quarter until January-March 2026, and by about 200 billion yen each calendar quarter from April-June 2026.
    1. (2) At the June 2026 MPM, the Bank will conduct an interim assessment of the plan for the reduction of its purchase amount of JGBs. In principle, the Bank intends to maintain the plan for the reduction after the assessment, while it may modify the plan as appropriate, if deemed necessary after reviewing the developments in and functioning of the JGB markets. At the meeting, it will also discuss a guideline for its JGB purchases from April 2027 and announce the results.
    1. (3) In the case of a rapid rise in long-term interest rates, it will make nimble responses by, for example, increasing the amount of JGB purchases and conducting fixed-rate purchase operations of JGBs -- both of which can be done regardless of the monthly schedule of JGB purchases -- and the Funds-Supplying Operations against Pooled Collateral.
    1. (4) The Bank is prepared to amend the plan for the reduction of its purchase amount of JGBs at the MPMs, if deemed necessary.

    At the September MPM, with regard to exchange-traded funds (ETFs) and Japan real estate investment trusts (J-REITs) the Bank holds, the Policy Board decided to sell these assets to the market for the time being, as described below, in accordance with the fundamental principles for their disposal, which include the principle to avoid inducing destabilizing effects on the financial markets. The scale of the sales would generally be equivalent to that for the "stocks purchased from financial institutions."

    1. (1) The Bank will sell ETFs to the market at a pace of about 330 billion yen (book value basis) per year, based on the prices formed in the exchange market.
    1. (2) The Bank will sell J-REITs to the market at a pace of about 5 billion yen (book value basis) per year, based on the prices formed in the exchange market.
    1. (3) Under the pace of sales described above, the Bank will sell each ETF and J-REIT in amounts approximately proportionate to the share of each asset in its holdings, with consideration to spreading out the timing of the sales.

    With regard to the future conduct of monetary policy, the Policy Board confirmed the following at the April MPM: "Given that real interest rates are at significantly low levels, if the aforementioned outlook for economic activity and prices will be realized, the Bank, in accordance with improvement in economic activity and prices, will continue to raise the policy interest rate and adjust the degree of monetary accommodation. In this regard, considering the extremely high uncertainties regarding the future course of trade and other policies in each jurisdiction and the impact of these policies, it is important for the Bank to carefully examine factors such as developments in economic activity and prices as well as in financial markets at home and abroad, and judge whether the outlook will be realized, without any preconceptions. With the price stability target of 2 percent, the Bank will conduct monetary policy as appropriate, in response to developments in economic activity and prices as well as financial conditions, from the perspective of sustainable and stable achievement of the target." At the July MPM, the Policy Board confirmed the following: "Given that real interest rates are at significantly low levels, if the aforementioned outlook for economic activity and prices will be realized, the Bank, in accordance with improvement in economic activity and prices, will continue to raise the policy interest rate and adjust the degree of monetary accommodation. In this regard, considering that high uncertainties remain regarding the future course of trade and other policies in each jurisdiction and the impact of these policies, it is important for the Bank to carefully examine factors such as developments in economic activity and prices as well as in financial markets at home and abroad, and judge whether the outlook will be realized, without any preconceptions. With the price stability target of 2 percent, the Bank will conduct monetary policy as appropriate, in response to developments in economic activity and prices as well as financial conditions, from the perspective of sustainable and stable achievement of the target."

The Bank's Balance Sheet

  1. As of end-September, the Bank's total assets amounted to 695.8 trillion yen, a decrease of 7.6 percent from the previous year.