Market Operations in Fiscal 2025
August 12, 2026
Financial Markets Department
Bank of Japan
Summary
Throughout fiscal 2025, 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 0.5 percent as the guideline for money market operations until the December 2025 Monetary Policy Meeting (MPM). Thereafter, it decided to encourage this rate to remain at around 0.75 percent at the December MPM. At the June 2025 MPM, the Bank conducted an interim assessment of the plan for the reduction of its purchase amount of Japanese government bonds (JGBs). Based on the assessment, it decided to reduce the planned amount of its monthly purchases of JGBs by, in principle, about 400 billion yen each calendar quarter until January-March 2026, and by about 200 billion yen each calendar quarter from April-June 2026, so that it would be about 2 trillion yen in January-March 2027.
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 money market operations.
Money markets
In the money markets, the uncollateralized overnight call rate remained extremely stable at a level slightly below the applicable interest rate for the Complementary Deposit Facility (the interest rate on excess reserve balances at the Bank). This was attributed to the fact that regional banks and other financial institutions eligible for the Complementary Deposit Facility continued to borrow funds actively in the uncollateralized call market to engage in arbitrage between the interest rate on excess reserve balances and the uncollateralized overnight call rate. The general collateral (GC) repo rate generally remained stable at a level close to the interest rate on excess reserve balances. In particular, during the second half of fiscal 2025, the GC repo rate gradually rose from a level slightly below the interest rate on excess reserve balances to a level close to it, reflecting (1) an easing of supply and demand conditions for bonds and (2) somewhat reduced investment demand from overseas investors using FX swaps (i.e., U.S. dollar-yen conversion). Rate fluctuations, such as those at month-end, also became limited.
JGB market and outright purchases of JGBs
Long-term interest rates increased markedly throughout fiscal 2025, albeit with some fluctuations stemming from factors such as uncertainties surrounding U.S. trade policies and speculation over Japan's fiscal and monetary policies. This rise is attributable to (1) an increase in the Bank's policy rate to around 0.75 percent, (2) an upward revision in expectations of future policy rates among market participants, given Japan's solid economic and price indicators, and (3) vigilance against inflation in response to higher crude oil prices amid increased tension over the situation in the Middle East through the fiscal year-end. In late March 2026, long-term interest rates reached the 2.35-2.40 percent range, the highest level since February 1999.
Meanwhile, regarding the outright purchases of JGBs, the Bank cut down the monthly purchase amount by about 400 billion yen each calendar quarter in accordance with the plan for the reduction of the purchase amount of JGBs decided at the July 2024 and June 2025 MPMs. As a result, JGB purchases for the January-March 2026 quarter totaled 8.7 trillion yen (2.9 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 residual maturity and type, the Bank adopted as its basic principle prioritizing reductions in its purchases of maturity segments where the share of its purchases in the monthly issuance amount is high, from the standpoint of ensuring a certain degree of predictability. On this basis, the Bank determined the reduction amount each calendar quarter, taking also into account factors such as developments in the JGB market for each maturity zone and the underlying supply and demand conditions.
Securities Lending Facility
Regarding the Securities Lending Facility, the Bank maintained its daily operation of offering all available Japanese government securities (JGSs) held by the Bank. Furthermore, with respect to off-the-run issues of which the Bank holds a large share, the Bank expanded the JGB issues that are applicable to the relaxed conditions for the reduction in the Bank's repurchase amount under the Securities Lending Facility (a measure in which counterparties purchase securities they have borrowed from the Bank under the facility), in cases where the reduction is deemed to contribute to improving liquidity in the JGB market. This expansion of the applicable issues was implemented as an exceptional measure aimed at easing the tightness of supply and demand conditions, as the effects of a reduction in the Bank's JGB purchases do not easily extend to these off-the-run issues. In this situation, the amount of bids accepted and the number of JGB issues borrowed remained at low levels, against the backdrop of (1) an increase in the amount outstanding of JGBs in the market, mainly due to the Bank's progress in reducing its JGB purchases and to the reduction in the Bank's repurchase amount under the Securities Lending Facility, as well as (2) the stable rate formation in the repo market.
Other operations
Among funds-supplying operations, the outstanding balance of the Fund-Provisioning Measure to Stimulate Bank Lending declined significantly on the back of the termination of new loan disbursements. Conversely, the amount outstanding of the Funds-Supplying Operations to Support Financing for Climate Change Responses continued to grow, as eligible counterparties maintained active use of the facility with the outstanding balance of investment and loans eligible for these operations continuing to increase. Besides, the Bank sold to the market exchange-traded funds (ETFs) and Japan real estate investment trusts (J-REITs) from January 2026, in accordance with the guideline decided at the September 2025 MPM.
Number of operations
Based on the above market operations, the number of operations conducted by the Bank in fiscal 2025 was 799 (879 in the previous fiscal year). This figure was the lowest since fiscal 2013, the year that the Bank introduced QQE.
The remainder of this report describes the Bank's market operations during fiscal 2025. First, Chapter II describes the developments in financial markets, such as money markets and JGB markets, and the conduct of each measure in market operations. Chapter III examines developments in current account balances at the Bank and the Bank's balance sheet under market operations. Chapter IV outlines the major changes in the frameworks related to market operations and others during the year. Finally, Chapter V presents the Bank's actions to enhance dialogue with market participants.
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Market Operations Division, Financial Markets Department
E-mail : post.fmd7@boj.or.jp