Key Facts
The Bank of Japan (BOJ) recently concluded a two-day series of meetings with bond market participants and banking groups to discuss the future of its government bond purchasing program. The discussions focused on the pace of reducing bond purchases beyond March 2026, with differing opinions emerging from various stakeholders.
During the May 21 meeting with buy-side participants, many attendees supported either slowing the pace of reductions or halting them altogether. This contrasts with the May 20 meeting with banking groups, where some participants advocated for accelerating the reduction of bond purchases. Overall, the majority of opinions across both meetings leaned toward maintaining or slowing the current reduction pace.
The BOJ’s current plan, announced in July 2024, outlines a quarterly reduction of ¥400 billion in bond purchases through March 2026. However, the upcoming mid-term review at the June monetary policy meeting will focus on whether to adjust this pace for the period starting April 2026.
According to participants in the May 21 meeting, there was significant support for either reducing the quarterly pace of ¥400 billion or freezing the reduction altogether, maintaining the monthly purchase level of ¥2.9 trillion seen in the first quarter of 2026.
In contrast, some banking representatives at the May 20 meeting argued for faster reductions. A representative from a major bank highlighted the BOJ’s high ownership of bonds in the 10-year and futures-adjacent zones, which they claimed limits the effectiveness of hedging mechanisms in the futures market. They suggested that allowing market forces to play a larger role in interest rate formation could improve market functionality. However, other banking representatives supported slowing the reduction pace.
The BOJ also released feedback collected from financial institutions ahead of the meetings. The majority of responses favored either maintaining the current reduction pace or slowing it, with fewer calls for acceleration. The BOJ has stated that it will carefully consider all opinions, including the reasoning behind them, as it formulates its post-March 2026 bond purchase strategy.
The Bank of Japan (BOJ) recently held two meetings to discuss its government bond purchasing program, focusing on the reduction pace beyond March 2026. On May 21, buy-side participants expressed strong support for either slowing the quarterly reduction of ¥400 billion or halting it entirely, maintaining the monthly purchase level of ¥2.9 trillion seen in early 2026. In contrast, some banking representatives at the May 20 meeting advocated for accelerating reductions, citing the BOJ’s high bond ownership in certain zones as a limitation on market functionality. However, other banking representatives supported a slower reduction pace.
Feedback collected from financial institutions ahead of the meetings revealed a majority preference for maintaining or slowing the current reduction pace, with fewer calls for acceleration. The BOJ plans to consider these opinions, including their underlying reasoning, during its mid-term review at the June monetary policy meeting. This review will determine whether to adjust the reduction pace for the period starting April 2026.
The BOJ’s current plan, announced in July 2024, outlines quarterly reductions of ¥400 billion through March 2026. The discussions mark a critical step in shaping the post-March 2026 bond purchase strategy.
