The Bank of Japan kept interest rates steady on Tuesday and decided to decelerate the pace of its balance sheet drawdown next year, signalling its preference to move cautiously in removing remnants of its massive,

As widely expected, the central bank maintained short-term interest rates at 0.5% by a unanimous vote at the two-day policy meeting that ended on Tuesday.

The Bank of Japan ((BoJ)) kept its key short-term interest rate unchanged at 0.5% during its June 2025 meeting, maintaining the highest level since 2008 and aligning with market expectations.

The Japanese central bank’s decision to slow the pace at which it cuts its monthly bond purchases came as its policy committee concluded a two-day meeting on Tuesday with a unanimous vote to hold short-term interest rates at 0.5 per cent.

Eurozone sentiment supports the Euro amid a cautious ECB tone. The Japanese Yen remains pressured as the Bank of Japan adopts a dovish tone. The Euro (EUR) is pulling back against the Japanese Yen (JPY) on Tuesday after hitting a year-to-date high and its strongest level since July.

The dollar slipped slightly against a range of currencies on Tuesday including the yen, which strengthened following the Bank of Japan's (BOJ) rate decision. Broader risk sentiment remained fragile with the Israel-Iran conflict entering its fifth day.

The Bank of Japan’s decision to hold interest rates and slow its withdrawal from the bond market was widely expected and should help reassure investors, though there will still be plenty of interest in Governor Kazuo Ueda’s press conference,

The central bank target of around 0.5 percent for short-term rates will remain in place. It made the announcement after its two-day policy meeting ended on Tuesday. The BOJ decision comes amid uncertainty about the economic effects in Japan of US President Donald Trump's tariff measures.