TOKYO: The Bank of Japan maintained its current interest rates while announcing plans to begin selling its holdings of exchange-traded funds and real estate investment trusts.
The central bank kept short-term interest rates steady at 0.5% following its two-day policy meeting ending Friday.
Two of the nine board members dissented from this decision and proposed raising borrowing costs to 0.75%.
The BOJ will sell its exchange-traded fund holdings at an annual pace of approximately 330 billion yen.
It will also dispose of real estate investment trusts at a yearly rate of around 5 billion yen.
The central bank stated these sales would follow fundamental principles to avoid destabilising financial markets.
Financial markets reacted immediately with the Nikkei index swinging into negative territory after the announcement.
The yen strengthened and short-term bond yields surged following the hawkish dissent and asset sale decision.
Saxo Chief Investment Strategist Charu Chanana noted the dissent highlights growing hawkish pressure within the BOJ.
“Their stance underscores a gradual shift in board dynamics that could lend yen some support,“ Chanana observed.
The decision to unwind ETF holdings came much sooner than market participants had anticipated.
This meeting followed the US Federal Reserve’s recent interest rate cut and signal for further reductions.
The BOJ ended its decade-long stimulus programme last year and raised rates to 0.5% in January.
Governor Kazuo Ueda has emphasised cautious approach due to uncertainty about US tariff impacts.
A Reuters poll shows economists expect another 25-basis-point rate hike by year-end.
Japan’s core consumer prices rose 2.7% year-on-year in August, marking the third consecutive monthly slowdown.
Inflation remains above the central bank’s 2% target despite the recent moderation. – Reuters