BOJ Weighs Halting Bond-Purchase Taper After March 2027 as JGB Volatility Intensifies
The Bank of Japan is weighing whether to pause further reductions in its government bond purchases beyond the fiscal year ending March 2027, people familiar with internal discussions said, as sharp swings in Japanese government bond yields complicate the central bank's exit from years of ultra-loose policy.
The debate comes after 10-year JGB yields jumped to 2.8% on May 18, the highest level in about 29.5 years, underscoring how sensitive markets remain to the BOJ's policy normalization.
The BOJ began scaling back its sizable bond buying in July 2024, initially trimming purchases by roughly 400 billion yen per quarter. The reduction pace is set to slow to 200 billion yen per quarter from April 2026. Under current guidance, monthly JGB purchases are targeted at about 2 to 3 trillion yen, with an aim of reaching around 2 trillion yen by the first quarter of 2027. The key question for policymakers is what comes next.
At the June 15–16 policy meeting, the BOJ is expected to review its tapering plan and discuss settings that extend into fiscal 2027. While board views are split, the dominant preference is said to be keeping monthly purchases at roughly the current level rather than cutting further. A BOJ survey conducted in May found some investors explicitly calling for an end to tapering starting in fiscal 2027, citing intense volatility and a desire for more stability.
Governor Kazuo Ueda has stressed the need to closely monitor bond-market moves, reflecting heightened sensitivity after the recent yield spike.
The stakes are amplified by the BOJ's outsized role in the market: it holds about 49% of all outstanding Japanese government bonds. The rise in yields has been fueled by wider volatility tied to geopolitical energy shocks and ongoing inflation concerns. Market attention is also on fiscal policy proposals under Prime Minister Sanae Takaichi's administration, which add uncertainty around how Japan will manage its heavy public debt load if funding costs continue to rise.
The BOJ's tapering framework was designed with flexibility to adjust to market conditions, and that safeguard is now being tested. Since 2024, under Ueda, the central bank has been dismantling key elements of its extraordinary stimulus, including ending yield-curve control, which had capped long-term interest rates.
The June 15–16 meeting is also expected to include discussion of interest-rate hikes, though there is little sign of an urgent push to accelerate tightening.
