Bank of Japan Considers Slowing Purchases of Government Bonds
Japanese reports indicate that the Bank of Japan (BOJ) is contemplating a reduction in its purchases of Japanese government bonds (JGBs) by about half starting in April 2026.
Currently, the BOJ buys roughly 400 billion yen worth of JGBs every quarter. However, there are discussions on cutting this amount to around 20 billion yen monthly. The Central Bank plans to explore potential changes during its policy meetings scheduled for Monday and Tuesday, focusing on options starting in April 2026.
Market Reaction
As of this moment, the USD/JPY exchange rate has risen by 0.19% for the day, with trading at 144.38.
Bank of Japan FAQ
The Bank of Japan (BOJ) serves as the country’s central bank, responsible for setting monetary policy. Its main goals include issuing banknotes and managing currency, along with financial regulations aimed at achieving a price stability target of around 2% inflation.
The BOJ adopted an ultra-loose monetary policy back in 2013 to fuel economic growth and combat low inflation. Its strategy involved quantitative and qualitative easing (QQE), which includes printing money to buy various assets, such as government and corporate bonds, to boost liquidity. In 2016, the bank introduced negative interest rates and expanded its strategy by actively managing government bond yields for over a decade. In March 2024, the BOJ raised interest rates, marking a shift away from an extremely loose monetary policy.
As a result of substantial bank stimulus, the yen weakened against major currencies. This trend intensified in 2022 and 2023 due to growing policy discrepancies between the BOJ and other central banks. The BOJ’s approach further devalued the yen as differences with other currencies widened. However, in 2024, this trend showed signs of reversal when the BOJ chose to move away from its ultra-loose policy stance.
The declining yen, coupled with rising global energy costs, has pushed Japan’s inflation beyond the BOJ’s 2% target. Anticipation of salary increases, a key factor for driving inflation, has also contributed to this shift.
