BOJ reduces JGB purchases, targeting 2 trillion yen monthly

The Bank of Japan has outlined a clear plan for the outright purchases of Japanese Government Bonds (JGBs), emphasizing predictability while maintaining flexibility.

Until the January-March 2027 calendar quarter, the Bank will reduce the planned amount of its monthly JGB purchases by approximately 200 billion yen each quarter.

This reduction plan, initially decided in June 2025, will be consistently maintained.

Following this phased approach, from April 2027 onwards, the amount of monthly JGB purchases will be set at about 2 trillion yen.

This strategy is designed to facilitate the formation of long-term interest rates in financial markets, while ensuring stability in the JGB markets.

The reduction in JGB holdings is projected to be roughly 36-39% by March 2030 compared to before the reduction began in June 2024, assuming the monthly purchase amount is maintained at about 2 trillion yen.

While committing to a predictable purchase schedule, the Bank of Japan retains significant flexibility to respond to market developments.

In the event of a rapid rise in long-term interest rates, the Bank is prepared to make nimble responses, including increasing the amount of JGB purchases as deemed necessary.

This adaptive approach underscores the Bank's commitment to supporting stability in the JGB markets under various conditions.

The Bank also reserves the right to amend the pace of its JGB purchases at future Monetary Policy Meetings (MPMs), taking into account its basic thinking on JGB purchases and broader market dynamics.