The Bank of Japan kept its benchmark short-term rate at 0.5% in September 2025, maintaining borrowing costs at their highest level since 2008 and in line with consensus. The decision, passed by a 7-2 vote, came amid risks tied to Japan’s political outlook and the impact of U.S. tariffs, and followed the U.S. Fed’s first rate cut since December. At the same meeting, the BoJ said it would begin selling its holdings of exchange-traded funds at about JPY 330 billion annually and real estate investment trusts at roughly JPY 5 billion, signaling further steps toward policy normalization. The board judged that Japan’s economy has recovered moderately despite areas of weakness. Private consumption was supported by improving employment and income, though sentiment softened while exports and industrial output remained subdued. Inflation hovered between 2.5% and 3.0%, driven mainly by food prices, especially rice, while inflation expectations edged up, and core CPI is projected to rise gradually.