Semiannual Report on Currency and Monetary Control (Summary)
Second Half of Fiscal 2024 (October 2024-March 2025)
-- The semiannual report was submitted to the Diet in June 2025.
Bank of Japan
Economic Developments
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During the period from October 2024 through March 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 due to the increase in U.S. tariffs in the second half of the October-March period. Corporate profits had been on an improving trend, and business sentiment had stayed at a favorable level. In this situation, business fixed investment had followed a moderate increasing trend. Private consumption had maintained its moderate increasing trend against the background of an improvement in the employment and income situation, despite weakness in consumer sentiment in the second half of the October-March period due to the impact of price rises and other factors. Housing investment had been relatively weak. Public investment had been more or less flat.
- Regarding price developments, the year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) had been in the range of 2.0-3.5 percent, as moves to pass on wage increases to selling prices had continued, and as there had been effects of the past rise in import prices and of the rise in food prices, such as rice prices. Inflation expectations had continued to rise moderately.
Developments in Financial Markets and Conditions
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Market sentiment in global financial markets had continued to improve through around mid-February 2025, but had turned cautious thereafter, mainly reflecting weaker-than-expected U.S. economic indicators and heightened concerns over trade policy in each jurisdiction.
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In the money market, the uncollateralized overnight call rate had been at around 0.25 percent up until the January 2025 Monetary Policy Meeting (MPM). Following the change in the guideline for money market operations at the January MPM, the rate had been at around 0.5 percent.
With regard to developments in the bond market, 10-year Japanese government bond (JGB) yields, while generally moving in line with long-term yields overseas, had risen against the background of factors such as generally solid economic indicators and the resultant change in market views on the Bank's future monetary policy.
The Nikkei 225 Stock Average had been more or less flat through mid-February. Thereafter, it had declined, mainly led by weaker-than-expected U.S. economic indicators, and was in the range of 35,000-36,000 yen at the end of March.
In the foreign exchange market, the yen had depreciated against the U.S. dollar on the whole during the October-March period, although the exchange rate had fluctuated in both directions. The U.S. dollar was in the range of 149-150 yen at the end of March. The yen had also depreciated against the euro on the whole during the same period.
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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 2.5-3.5 percent. The rate of increase in the aggregate amount outstanding of CP and corporate bonds had been in the range of 2.5-5.0 percent.
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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. The rate of change in the money stock (M2) had been in the range of 0.5-1.5 percent.
MPMs
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Four MPMs were held in the second half of fiscal 2024.
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."
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In the conduct of monetary policy, the Policy Board decided at the October and December MPMs to maintain the following guideline for money market operations.
The Bank will encourage the uncollateralized overnight call rate to remain at around 0.25 percent.
At the January MPM, the Policy Board judged it appropriate to adjust the degree of monetary accommodation and decided to set the following guideline for money market operations for the intermeeting period.
The Bank will encourage the uncollateralized overnight call rate to remain at around 0.5 percent.
In addition, in accordance with the above change in the guideline for money market operations, the Policy Board decided to change the interest rates applied to the Bank's measures.
- (1) Interest rate applied to the complementary deposit facility
The interest rate applied to the complementary deposit facility (the interest rate applied to current account balances held by financial institutions at the Bank, excluding required reserve balances) will be 0.5 percent.
- (2) Basic loan rate
The basic loan rate applicable under the complementary lending facility will be 0.75 percent.
At the March MPM, the Policy Board decided to maintain the above guideline for money market operations.
With regard to the future conduct of monetary policy, the Policy Board confirmed the following at the October MPM: "While the conduct of monetary policy will depend on developments in economic activity and prices as well as financial conditions going forward, given that real interest rates are at significantly low levels, if the aforementioned outlook for economic activity and prices will be realized, the Bank will accordingly continue to raise the policy interest rate and adjust the degree of monetary accommodation. On this basis, the Bank needs to pay due attention to the future course of overseas economies, particularly the U.S. economy, and developments in financial and capital markets. It also needs to examine how these factors will affect the outlook for Japan's economic activity and prices, the risks surrounding them, and the likelihood of realizing the outlook. 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 January MPM, the Policy Board confirmed the following: "While the conduct of monetary policy will depend on developments in economic activity and prices as well as financial conditions going forward, given that real interest rates are at significantly low levels, if the aforementioned outlook for economic activity and prices will be realized, the Bank will accordingly continue to raise the policy interest rate and adjust the degree of monetary accommodation. With the price stability target of 2 percent, it 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."
Regarding the Fund-Provisioning Measure to Stimulate Bank Lending, the Policy Board decided at the January MPM that new loan disbursements would not be made after June 30, 2025, as scheduled. With the aim of facilitating the smooth termination of the measure, the Policy Board also decided, as a transitional measure, to allow counterparties to roll over up to 50 percent of the amount of loans maturing between July 1 and December 31, 2025, into one-year loans.
The Bank's Balance Sheet
As of end-March, the Bank's total assets amounted to 729.8 trillion yen, a decrease of 3.5 percent from the previous year.