On July 28, 2023, the Bank of Japan (BOJ) announced plans to reduce its government bond purchases at a slower pace starting in April 2026. The benchmark interest rate remains unchanged at 0.5%, amidst rising growth risks. The BOJ aims to cut monthly Japanese government bond (JGB) purchases to about 3 trillion yen per quarter until March 2026, and subsequently to 2 trillion yen per month from April 2026 until March 2027. An assessment of this plan will occur at the June 2026 Monetary Policy Conference.
This strategy aims to enhance market stability in the JGB market. Despite recent highs in JGB yields, the BOJ remains optimistic about inflation meeting its 2% target. Japan faces growth uncertainty, with slower exports impacting economic performance, as evidenced by a 0.2% contraction in GDP for the quarter ending in March. Though inflation hit 3.6% in April, which exceeds the BOJ’s target, concerns over economic slowdown persist.
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