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.

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 decision came as an escalating Middle East conflict and U.S. tariffs complicate the BOJ's task of raising still-low interest rates and reducing a balance sheet that has ballooned to roughly the size of Japan's economy.

Following are excerpts from BOJ Governor Kazuo Ueda's comments at his post-meeting news conference, which was conducted in Japanese, as translated by Reuters: "It's desirable to continue tapering to allow yields to move more freely reflecting market forces. But tapering too rapidly could cause unintended impact on market stability."

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 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.

EUR/JPY continues its winning streak that began on June 5, trading around 167.40 during the Asian hours on Tuesday. The pair has marked 167.59, the highest since July 2024. The currency pair holds ground after the Bank of Japan (BoJ) decided to keep the short-term interest rate target unchanged in the range of 0.4%- 0.5% in June.