What is Bank of Japan (BoJ)?
The Bank of Japan was established in 1882 and is Japan's central bank. For most of the past 25 years, the BoJ has fought deflation rather than inflation, deploying ultra-loose policy: zero/negative interest rates (since 2016), Yield Curve Control (YCC), and massive asset purchases (the BoJ owns over 50% of Japan's government bond market and major equity ETFs). Recent years have seen a gradual policy normalization as inflation finally returned to target.
Why it matters for investors
BoJ policy historically anchored the yen as the world's funding currency for the carry trade — borrowing cheap yen to invest in higher-yielding currencies. Any BoJ tightening reverberates through global markets via yen-funded carry trades unwinding. Japanese pension funds (GPIF, the world's largest) shift between JGBs and global equities based partly on BoJ guidance.