BOJ Eyes Slower Government Bond Purchase Cuts – What It Means for Markets

The Bank of Japan is hitting the brakes—just a little—on its bond-buying slowdown. Here''s why it matters.

Yield Curve Whispers

Sources say the BOJ''s infamous ''stealth taper'' might get even stealthier. No hard numbers yet, but traders are already pricing in the drama.

Quantitative Tightening Lite

This isn''t your grandpa''s rate hike cycle. The BOJ''s playing 4D chess with liquidity while everyone else panics about inflation targets.

The Cynic''s Take

Another central bank ''adjustment'' that''ll require five PhDs to interpret—just in time for quarterly earnings season. How convenient.

Tapering of bond purchases by the BOJ increases the yields 

The BOJ began unprecedented quantitative easing in 2013 to pump money into the economy with massive JGB purchases. In September 2016, it added yield curve control to its tools. By buying bonds, long-term rates were kept low.

In March 2024, the bank moved toward adjusting its policy. It stopped buying bonds as a policy tool and started buying less each month in August of that year.

In July 2024, the amount paid for things was 5.7 trillion yen monthly. Beginning in August 2024, the BOJ cut back on buying JGB. In January 2026, it will drop to 2.9 trillion yen. If the cut is made to 200 billion yen every three months starting in April 2026, the amount bought will be about 2.1 trillion yen every month from January 2027.

However, some investors in the market believe that the tapering of bond purchases by the BOJ is contributing to the yield rise.

Tapering bond purchases “is now on autopilot, and if there is any hawkish action going forward it is likely to be in policy rate settings,” said Katsuhiko Aiba, Citi Japan economist.

Economists at Bank of America said that one of the most important things to watch for is whether the BoJ makes it clear that it plans to do another interim review in 2026 and whether it expresses its view on the appropriate “terminal” purchase amount of JGBs, or the amount it buys some years in the future.

According to Goldman Sachs economists, price cuts will happen more slowly over the next year until they reach 2 trillion yen monthly.

The BOJ still wants to keep interest rates from going up and keep the market from going crazy by continuing to sell off government bonds.

On the other hand, bonds purchased by the BOJ in the past reaching maturity are helping reduce its debt holdings.

The BOJ owned about 560 trillion yen of government bonds at the end of December. This was 52% of the total amount of outstanding government debt. Because tapering is going so slowly, the BOJ has received criticism that its “holdings are still too large.”

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