It has since slowed purchases of Japanese government bonds (JGB) and terminated a funding scheme that incentivised financial institutions to boost lending.
Reflecting such moves, the average balance of monetary base in 2025 dropped 4.9 per cent year-on-year, marking the first fall since 2007, when the BOJ was embarking on its previous rate-hike cycle, data showed.
The average balance of monetary base in December stood at ¥594.19 trillion (US$3.79 trillion), down 9.8 per cent from a year ago, and falling below the ¥600 trillion mark for the first time since September 2020.
Analysts expect Japan's monetary base to continue falling as the BOJ proceeds with bond tapering and rate hikes.
With inflation surpassing BOJ's 2 per cent target for nearly four years, the central bank raised short-term rates to 0.75 per cent from 0.5 per cent in December.
Governor Kazuo Ueda stressed the bank's readiness to continue raising rates if economic and price developments move in line with its forecast.
Frequently Asked Questions
Why did Japan’s monetary base fall in 2025?
Because the Bank of Japan slowed its Japanese government bond (JGB) purchases and ended a funding scheme that encouraged banks to increase lending.
ow much did Japan’s average monetary base decline in 2025?
It dropped 4.9% year-on-year, marking the first decline since 2007.
Q3. What was the monetary base level in December 2025, and w
What was the monetary base level in December 2025, and why is it important?
It stood at ¥594.19 trillion, down 9.8% from a year earlier, falling below ¥600 trillion for the first time since September 2020.
What do analysts expect regarding Japan’s monetary base going forward?
Analysts expect it to continue falling as the BOJ proceeds with bond tapering and further rate hikes.
How has BOJ responded to sustained inflation?
With inflation above 2% for nearly four years, the BOJ raised short-term interest rates to 0.75% and signaled readiness to raise rates further if economic conditions align with forecasts.
