Bank of Japan to Slow Pace of Bond Purchase Cuts from April 2026

Tokyo - The Bank of Japan (BOJ) on Tuesday confirmed plans to slow the reduction of its Japanese government bond (JGB) purchases starting April next year, citing persistent economic uncertainty and elevated inflation.

As of the current quarter ending June 2025, the BOJ is buying approximately 4.1 trillion yen ($28.4 billion) in JGBs monthly. Under the existing plan, the central bank will continue to reduce monthly bond purchases by 400 billion yen per quarter, targeting a total of 3 trillion yen per month by March 2026.

From April 2026 through March 2027, the pace of reductions will be halved to 200 billion yen per quarter, with a final target of 2 trillion yen in monthly purchases. An interim review is scheduled for June 2026.

“The goal is to enhance the functioning of JGB markets while maintaining overall financial stability,” the BOJ said in a statement.

Rate Hold and Inflation Concerns

The BOJ held its benchmark interest rate steady at 0.5%, in line with forecasts. BOJ Governor Kazuo Ueda last week reiterated the central bank's readiness to consider rate hikes only after more consistent signs that core inflation is anchored near the 2% target.

Headline inflation in April rose to 3.5%, driven by supply constraints including a national rice shortage, forcing the government to release emergency reserves. Inflation has now remained above the BOJ’s 2% target for over three consecutive years.

Growth Outlook Weakens

Japan’s GDP contracted by 0.2% in Q1 2025 compared to the previous quarter, marking its first economic decline in a year. Export slowdowns and weak domestic demand have raised concerns over Japan’s near-term growth trajectory.

Despite the planned tapering, analysts note the BOJ’s shift is cautious and calibrated to avoid destabilizing bond markets or tightening conditions prematurely.