The Bank of Japan left its key rate at near zero and introduced a 1 trillion yen loan package for financial institutions in the earthquake hit areas.
The Policy Board decided to maintain the uncollateralized overnight call rate at around 0 to 0.1 percent by a unanimous vote on Thursday. At the Monetary Policy Meeting, the board also judged it necessary to provide longer-term funds to financial institutions in disaster areas so as to support restoration and rebuilding works.
Accordingly, it will offer maximum 1 trillion yen loans at a rate of 0.1 percent per annum. Loans will be given for a period of one year against pooled collateral.
Further, the bank will broaden the range of eligible collateral for money market operations in order to secure sufficient financing capacity of financial institutions.
Since the devastating earthquake hit the nation last month, the bank has strengthened its monetary easing by raising the Asset Purchase Program size by about 5 trillion yen. Today, the BoJ reiterated to take further appropriate policy actions if necessary.
Further, the bank downgraded its economic assessment. The earthquake damaged production facilities, disrupted the supply chain and in turn dampened exports and domestic demand. The annual fall in consumer prices, excluding fresh food, continued to slow. Although financial conditions continued to ease, the financial positions of some firms, especially smaller ones, showed signs of weakness.
Going forward, the Japan economy is set to stay under strong downward pressure, mainly on the production front. However, the situation is expected to return to a moderate recovery path, provided supply-side constraints are mitigated and production regains traction. The central bank sees high uncertainty about the possible effects of the earthquake disaster on the economy.
On the consumer price side, the bank sees the possibility of inflation rising more than expected if global commodity prices increase further. It also expects the risk of inflation to deviate downward from its baseline projection.
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.