Long-term bond yields reach 2.4 percent as balance sheet shrinks

During fiscal 2025, the Bank of Japan raised the uncollateralized overnight call rate guideline from around 0.5 percent to around 0.75 percent at its December meeting.

Alongside rate increases, the central bank executed its plan to taper Japanese government bond (JGB) purchases, cutting monthly buying by 400 billion yen each quarter down to 2.9 trillion yen in January-March 2026.

This marked the lowest quarterly buying volume since the introduction of quantitative and qualitative easing in 2013.

Long-term JGB yields rose significantly across the year, touching 2.35 to 2.40 percent in late March 2026, the highest level recorded since February 1999.

In total, the bank conducted 799 market operations during the fiscal year, down from 879 in fiscal 2024.

The contraction of the central bank balance sheet to 663.0 trillion yen was heavily driven by changes in special lending operations.

Outstanding loans under the Stimulating Bank Lending Facility dropped by 24.5 trillion yen to 48.5 trillion yen following the termination of new disbursements in June 2025.

Conversely, usage of Climate Response Financing Operations expanded by 6.9 trillion yen to 21.1 trillion yen.

Furthermore, the bank began selling its stock of exchange-traded funds and J-REITs in January 2026, targeting annual sales paces of 330 billion yen and 5 billion yen respectively.