Odaily reported that the Bank of Japan said its Policy Board reviewed developments and functioning in the Japanese government bond market at today’s monetary policy meeting, and discussed its future approach to Japanese government bond purchases. The central bank stated that, in principle, long-term interest rates should be formed by financial markets. On that basis, it said it is appropriate for the BOJ to conduct JGB purchases in a predictable manner while retaining sufficient flexibility to support stability in the JGB market.
Purchase reduction path approved by a 7-to-1 vote
To improve the functioning and stability of the Japanese government bond market, the BOJ Policy Board decided by a 7-to-1 majority vote to adopt a new set of measures. Under the decision, from now through the January–March period of 2027, the central bank will, in principle, reduce the planned amount of monthly JGB purchases by about 200 billion yen each calendar quarter. The decision sets out a quarterly adjustment path for the BOJ’s monthly purchase plan.
According to the BOJ’s arrangement, from April 2027 onward, the amount of monthly JGB purchases will be maintained at around 2 trillion yen. This means that, after the planned step-by-step reductions in the monthly purchase amount, the central bank will keep its buying at that level. Odaily, citing Jinshi, reported that the BOJ also emphasized the principle that long-term interest rates should be formed by financial markets, while the central bank’s bond-buying operations should balance predictability with support for market stability.
Flexible tools retained if long-term rates rise rapidly
The BOJ also said that if long-term interest rates rise rapidly, it will take flexible measures in response. These measures include increasing the amount of JGB purchases, conducting fixed-rate purchase operations for Japanese government bonds, and carrying out fund-supplying operations against pooled collateral. The BOJ specified that both increased JGB purchases and fixed-rate JGB purchase operations may be conducted outside the limits of the monthly JGB purchase plan.
In addition, the BOJ said it will not conduct an interim assessment of the direct JGB purchase plan going forward. However, it stated that it is prepared to adjust the pace of Japanese government bond purchases at monetary policy meetings when it deems such action necessary, based on its basic approach to JGB purchases, developments in the JGB market and other factors. The decision therefore lays out a defined purchase-reduction schedule while keeping room for operational adjustments if market conditions change.