Bank of Japan: Will They Slow Bond Purchase Normalization?

Volatility in Japanese Government Bonds

• 📈 The Japanese government bond market is experiencing heightened volatility, prompting the Bank of Japan to consider slowing its bond purchase tapering.
• ⚠️ Investors are concerned about Japan's worsening public finances, leading to record highs in longer-term yields.

Bank of Japan's Normalization Plan

• 📉 The Bank of Japan began tapering its bond buying last year to reduce reliance on massive stimulus and revitalize the bond market.
• 🎯 A decision on the pace of tapering is expected next week, with the board reviewing the current plan and mapping out 2026.
• 💰 Bond market participants have requested the Bank of Japan cut its quarterly taper size to approximately 200 billion yen, halving the reduction from the current plan.

Current Market Conditions

• 🏦 Despite rising super-long bond yields, medium and shorter maturity bonds as well as bank lending rates remain stable.
• 🚫 The Bank of Japan is not inclined to increase bond buying, especially after ditching its bond yield control policy last year.