Published Thu, May 21, 2026 · 04:15 PM — Updated Thu, May 21, 2026 · 05:11 PM
SOME Bank of Japan drew some requests to pause its bond taper plan, its survey of investors showed, as recent sharp bond market swings overshadow a review of a quantitative tightening (QT) plan due next month.
Though others opted to maintain the moderate pace of the taper, one investor said the BOJ must stand ready for emergency bond-buying operations if markets turned unstable, a summary of the survey released by the central bank showed on Thursday.
The summary highlights the challenge the bank faces in reducing its massive holdings of Japanese government bonds (JGB) at a time when mounting inflationary fears from the Middle East conflict are making bond markets jittery.
June meeting to review programme
At its next policy meeting in June, the BOJ will review its existing bond-taper programme running through March 2027 and lay out a new plan for fiscal 2027 onward.
The bank has been tapering its huge bond purchases since 2024 and currently buys roughly 2.1 trillion yen (S$16.9 billion) worth of JGBs per month.
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In a survey ahead of the June review, some investors urged the BOJ to pause its bond taper from next fiscal year onward and keep buying at the current pace, the BOJ said.
“(Buying at) 2.1 trillion yen is unlikely to distort market function,” one financial institution was quoted as saying in the survey, a view echoed by another investor.
Others, however, called for the BOJ to continue slowing its bond buying, with some arguing it should eventually slow monthly purchases to about 1.3 trillion yen or even zero, the summary showed.
“The BOJ should continue tapering at a quarterly pace of 200 billion yen so that (monthly) bond buying eventually slows to around 1.3 trillion yen, which is the level it had been buying before the Lehman crisis,” one investor was quoted as saying.
A reduction in the BOJ’s bond holdings from around 500 trillion yen now has been in train since 2024 under Governor Kazuo Ueda as the bank moves to normalise monetary policy after decades of ultra-low interest rates.
“The BOJ’s balance sheet has become very large due to a prolonged period of unconventional monetary policy,” BOJ board member Junko Koeda said on Thursday. “It’s important to continue normalising the balance sheet flexibly and with predictability.”
Market turbulence could slow unwinding of bet
Financial market turbulence could force the BOJ to slow its unwinding of debt holdings, sources have told Reuters, giving anxious bond investors some relief as surging yields lay bare worsening fiscal strains and inflation pressures.
While the central bank sets a high bar for outright bond market intervention, the summary showed one investor calling for such a move, in a sign of the strain market players are facing from the global bond rout.
“When bond markets become unstable, the BOJ should nimbly take action such as conducting emergency market operations,” one investor said.
The survey is among key factors the BOJ will scrutinise in mapping out its bond taper plan for the next fiscal year and beyond. REUTERS
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