Market Operations in Fiscal 2024
August 21, 2025
Financial Markets Department
Bank of Japan
Summary
Throughout fiscal 2024, with a view to achieving the price stability target of 2 percent in a sustainable and stable manner, the Bank of Japan conducted monetary policy, guiding the short-term interest rate as a primary policy tool. Specifically, the Bank decided to encourage the uncollateralized overnight call rate, which is the policy rate, to remain at around 0 to 0.1 percent as the guideline for market operations until the July Monetary Policy Meeting (MPM). Thereafter, it decided to encourage this rate to remain at around 0.25 percent at the July MPM and around 0.5 percent at the January 2025 MPM, respectively. Regarding the purchase amounts of Japanese government bonds (JGBs), the Bank decided at the July 2024 MPM on a plan to reduce the amount of its monthly outright purchases by about 400 billion yen each calendar quarter, in principle, so that it would be about 3 trillion yen in January-March 2026.
The following is a summary of developments in the money markets and the JGB market, as well as key points in the conduct of the Bank's operations under the aforementioned guidelines for market operations.
Money markets
In the money markets, the uncollateralized overnight call rate remained extremely stable at a level slightly below the interest rate on excess reserve balances at the Bank (the applicable interest rate for the Complementary Deposit Facility), as regional banks and other financial institutions eligible for the Complementary Deposit Facility continued to borrow funds actively in the uncollateralized call market. The general collateral (GC) repo rate continued to experience relatively large daily fluctuations for some time after the start of fiscal 2024. From the summer onward, as positive rates took hold, banks and other financial institutions borrowed cash more actively in the repo market through the effective use of their JGB holdings. Against this background, the rate was lifted and stabilized, thereby moving closer to the level of the interest rate on excess reserve balances.
Outright purchases of JGBs and developments in the JGB market
Outright purchases of JGBs were around 6 trillion yen per month until July 2024. Starting in August, the purchase amount was reduced by about 400 billion yen every quarter, in line with the reduction plan decided in July. As a result, JGB purchases for the January-March 2025 quarter totaled 13.5 trillion yen (4.5 trillion yen per month), the lowest level since the introduction of the quantitative and qualitative monetary easing (QQE) in the April-June 2013 quarter. Regarding the reduction in purchase amounts by maturity segment, the Bank prioritized reducing purchases of JGBs with residual maturities of up to 10 years. This approach was based on the Bank's basic stance of prioritizing reducing its purchases of segments where the shares of its purchases in the monthly issuance amount are high, from the standpoint of ensuring a certain degree of predictability.
As the reduction of JGB purchases proceeded, long-term interest rates began to move more freely in financial markets. (1) The Bank raised its policy rate to about 0.5 percent, and (2) market participants expected further increases in the policy rate given Japan's solid economic and price indicators; therefore, long-term interest rates increased markedly throughout fiscal 2024. By late March 2025, they temporarily reached 1.59 percent, the highest level since October 2008.
Outright purchases of CP and corporate bonds
In line with the policy decided at the March 2024 MPM to gradually reduce the amount of purchases of CP and corporate bonds and discontinue these purchases in about one year, the amount was gradually reduced until these purchases were discontinued after the January 2025 auction. Because the pace of the reductions was gradual, the impact of the discontinuation on the CP and corporate bond markets was minimal.
Other funds-supplying operations
For other funds-supplying operations, the loans disbursed through the Fund-Provisioning Measure to Stimulate Bank Lending were changed to a floating rate basis, providing eligible counterparties with a reasonable level of incentive to borrow funds under the measure, taking into account economic and financial conditions. As a result, starting in September 2024, financial institutions generally became less inclined to use this facility, and the outstanding balance of the facility began to decline. Conversely, the amount outstanding of the Funds-Supplying Operations to Support Financing for Climate Change Responses continued to grow. This occurred because the outstanding balance of investment and loans eligible for these operations continued to increase, and eligible counterparties maintained active use of the facility to raise stable funding at low fixed interest rates, given growing expectations for higher interest rates.
Securities Lending Facility
Meanwhile, the usage amount of the Securities Lending Facility declined overall, mainly due to the increased amount of outstanding JGBs in the market resulting from the aforementioned reduction in the Bank's JGB purchases. However, usage remained constant for a certain number of JGB issues. Under these circumstances, the Bank maintained its daily operation of offering all available Japanese government securities (JGSs) held by the Bank. Furthermore, for the cheapest-to-deliver issues of which the Bank holds a significant share, the Bank also worked to ease excessive tightening in the supply and demand conditions of these issues. For example, the Bank clarified its policy that it would accept counterparties' requests to reduce the amount of the cheapest-to-deliver issues repurchased by the Bank under the facility if the reduction was deemed to contribute to improving the liquidity of the JGB market.
Number of operations
Based on the above market operations, the number of operations conducted by the Bank in fiscal 2024 declined, mainly in the JGB purchases, to 879 (down from 1,340 in fiscal 2023). This figure was the second lowest level since fiscal 2013, following fiscal 2013, the year that the Bank introduced QQE.
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Market Operations Division, Financial Markets Department
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