Key Facts
The Bank of Japan (BOJ) recently concluded a two-day series of meetings with bond market participants and financial institutions to discuss its government bond purchasing plans beyond April 2026. During the discussions, differing opinions emerged regarding the pace of reducing bond purchases, with a majority favoring either maintaining the current reduction rate or slowing it down.
At the May 21 meeting with buy-side participants, many attendees supported either decelerating the quarterly reduction pace of ¥400 billion or halting reductions altogether. Some suggested maintaining the purchase amount at ¥2.9 trillion per month, the level planned for January to March 2026. This cautious stance contrasts with the May 20 meeting with banking groups, where some participants advocated for accelerating the reduction pace. A representative from a major bank argued that the BOJ’s high ownership of bonds, particularly in long-term and futures-adjacent zones, limits market functionality and hedging capabilities. However, other banking representatives supported slowing the reduction pace.
The BOJ’s current bond purchase plan, announced in July 2024, outlines a quarterly reduction of ¥400 billion through March 2026. A mid-term review scheduled for June 2025 will focus on determining the reduction pace for the subsequent period.
Feedback collected by the BOJ from financial institutions prior to the meetings revealed a variety of perspectives. However, opinions favoring either maintaining the current reduction pace or slowing it down were more prevalent. The BOJ has stated that it will carefully consider all viewpoints, including the underlying reasoning behind each, as it formulates its post-March 2026 strategy.
The discussions highlight the ongoing debate over balancing market stability with the need to reduce the BOJ’s bond holdings. The central bank aims to ensure that its policies support market functionality while addressing concerns about long-term interest rate volatility.
The Bank of Japan (BOJ) recently held two meetings with bond market participants and financial institutions to discuss its government bond purchasing strategy beyond April 2026. Diverging views emerged, with most participants favoring either maintaining the current reduction pace or slowing it down.
During the May 21 meeting with buy-side participants, many supported reducing the quarterly pace of ¥400 billion or halting reductions entirely. Some proposed maintaining the purchase amount at ¥2.9 trillion per month, the level planned for January to March 2026. In contrast, the May 20 meeting with banking groups saw some advocating for faster reductions, citing concerns over the BOJ’s high bond ownership affecting market functionality and hedging. However, other banking representatives supported a slower reduction pace.
The BOJ’s current plan, announced in July 2024, reduces bond purchases by ¥400 billion quarterly through March 2026. A mid-term review in June 2025 will determine the pace for the subsequent period. Feedback from financial institutions prior to the meetings showed a preference for maintaining or slowing the reduction pace. The BOJ emphasized it will carefully consider all perspectives in shaping its post-March 2026 strategy.
