Bank of Japan Scales Back JGB Buying at Record Speed

After more than a decade as the buyer of last resort in the world's second-largest bond market, the Bank of Japan is shrinking its footprint faster than many expected. The BoJ's monthly purchases of Japanese Government Bonds are set at 2.9 trillion yen for the January–March 2026 quarter, the lowest pace since it launched quantitative and qualitative easing in April 2013. The central bank's balance sheet has fallen by about 94.3 trillion yen, a 12.6% drop from its 2024 peak, while JGB holdings alone are down more than 10% from recent highs. The unwind plan dates to July 2024, when the BoJ outlined a structured taper. The schedule called for reducing monthly buying by roughly 400 billion yen each quarter through January–March 2026, then slowing the reduction to 200 billion yen per quarter after that. The stated goal is to bring monthly purchases to around 2 trillion yen by the January–March 2027 quarter. The retreat extends beyond bonds. The BoJ has begun selling equity ETFs worth about 330 billion yen a year, along with J-REITs totaling roughly 5 billion yen annually. Markets are already adjusting. Long-term JGB yields rose to 2.35–2.40% in late March 2026, the highest since February 1999. The BoJ has signaled it will remain flexible and intervene if needed to support market stability, but the direction is toward less intervention and more price discovery. The implications reach beyond Japan. JGBs sit at the core of global fixed-income portfolios, and Japanese investors are among the world's largest holders of overseas bonds. If domestic yields become attractive again, capital that moved into U.S. Treasuries, European sovereign debt and other markets over the past decade could start returning home. For the yen, higher yields are typically supportive. The currency has been weighed down in part by the wide gap between Japanese and U.S. interest rates. As that gap narrows, the yen carry trade—borrowing cheaply in yen to buy higher-yielding assets abroad—becomes less compelling. At home, the shift comes with risks. Japanese companies and the government have long relied on ultra-low borrowing costs. Japan's debt-to-GDP ratio remains the highest among developed economies, and even modest increases in debt servicing costs can quickly erode fiscal space.