The Bank of Japan is being urged by market participants to either maintain or ease the pace of its bond purchase tapering beyond fiscal 2026, according to a summary of meetings the Bank held in late May with bond market players. The requests reflect growing concern over recent volatility in super-long Japanese government bond (JGB) yields and waning investor demand.
While the BOJ is currently on track to halve monthly bond purchases to ¥3 trillion by March 2026, many attendees at the meeting called for the pace to be sustained or only modestly reduced thereafter. Some suggested cutting purchases further to ¥1–2 trillion per month, while others proposed keeping the current level or even suspending reductions for super-long bonds due to poor liquidity.
The divergence in views highlights the delicate balancing act facing the BOJ, which will review its tapering strategy at the June 16–17 policy meeting. Some participants called for greater flexibility in the BOJ’s approach, especially in the super-long segment of the curve. However, others cautioned against overreacting to structural market shifts, noting that weak demand may limit the central bank’s ability to manage volatility.
Despite ending negative interest rates and initiating a gradual taper, the BOJ still holds nearly half of all outstanding JGBs, leaving it far behind global peers in winding down crisis-era stimulus.
Info via Reuters
This article was written by Eamonn Sheridan at www.forexlive.com.
