BoJ outlines JGB purchase reduction to 2 trillion yen
The Bank of Japan decided to reduce its monthly Japanese Government Bond purchases by approximately 200 billion yen each calendar quarter until March 2027. This will bring the monthly purchase amount to about 2 trillion yen from April 2027.
Phased reduction to 2 trillion yen
The Bank of Japan's Policy Board, by a 7-1 majority vote at its Monetary Policy Meeting, decided to reduce its monthly Japanese Government Bond (JGB) purchases.
This phased reduction will decrease the amount by approximately 200 billion yen each calendar quarter until March 2027.
Specifically, purchases will fall from about 2.7 trillion yen in April-June 2026 to 2.5 trillion yen in July-September 2026, then to 2.3 trillion yen in October-December 2026, and 2.1 trillion yen in January-March 2027.
From April 2027 onward, the monthly purchase amount will stabilize at about 2 trillion yen.
The Bank emphasized that long-term interest rates should primarily be formed in financial markets, and its purchases should be predictable while supporting market stability.
Voting for the action included HIMINO Ryozo, UCHIDA Shinichi, NAKAGAWA Junko, TAKATA Hajime, KOEDA Junko, MASU Kazuyuki, and ASADA Toichiro.
Dissent on pace, flexibility on rates
Tamura Naoki cast the sole dissenting vote, arguing that the Bank should allow long-term interest rates to be determined more freely by the market.
He proposed a longer reduction period, extending until January-March 2028, but his proposal was defeated.
Despite the planned reduction, the Bank affirmed its readiness to respond nimbly to rapid rises in long-term interest rates.
This includes increasing JGB purchases or conducting fixed-rate purchase operations, independent of the monthly schedule, and utilizing Funds-Supplying Operations against Pooled Collateral.
The BoJ also stated it will not conduct interim assessments of this plan but is prepared to amend the pace of purchases at future Monetary Policy Meetings if necessary.
A cautious step towards normalization
This decision marks a significant, albeit gradual, step by the Bank of Japan towards normalizing its ultra-loose monetary policy.
The modest reduction signals a clear intent to unwind quantitative easing in a predictable manner, reducing market uncertainty.
However, the explicit commitment to nimble responses against rising rates suggests the BoJ remains highly sensitive to market stability, limiting the immediate impact on yields.