BOJ May Cut Super-Long Bond Purchases in Q2 to Advance Policy Normalization

The Bank of Japan (BOJ) is expected to take a key step toward policy normalization by potentially reducing purchases of super-long Japanese government bonds (JGBs) in its upcoming April-June bond-buying plan, analysts say.

Under its quantitative tightening (QT) plan introduced in July 2023, the BOJ has been cutting bond purchases by 400 billion yen per quarter, aiming to halve monthly purchases to 3 trillion yen by March 2026. While the central bank has focused on tapering benchmark 10-year bonds, it has so far refrained from reducing purchases of longer-term bonds—those maturing in 10 to 25 years.

That could change soon. With progress in reducing short-term bond buying, the BOJ is now poised to start trimming super-long bond purchases from April. Analysts like Katsutoshi Inadome of Sumitomo Mitsui Trust Asset Management believe the move would signal a full-fledged shift in the BOJ’s QT strategy, likely sparking a sell-off in that bond category.

Currently, the BOJ purchases 4.5 trillion yen in JGBs monthly, with 450 billion yen allocated to super-long maturities. The central bank, which owns nearly half of all outstanding JGBs—about 600 trillion yen, roughly the size of Japan’s GDP—raised its short-term policy rate to 0.5% in January 2025 and is prepared for further hikes if inflation continues to meet projections.

Despite rising market yields, including a 15-year high of 1.59% on 10-year JGBs, the BOJ remains committed to gradual tapering. The April-June bond-buying schedule will be announced Monday, with a detailed breakdown by maturity.

The current QT plan runs through March 2026, and a new tapering framework beyond that will be decided in June.