Bank of Japan trimmed monthly JGB purchases for Oct-Dec

Bond Purchase: The Bank of Japan trimmed monthly bond purchases Wednesday in its first step under new Governor Kazuo Ueda toward quantitative tightening.

The BOJ on Monday had decided to reduce its purchases of Japanese government bonds by 10 percent in the fourth quarter, continuing its efforts to gradually reduce its sizable holdings of JGBs.

The BOJ will curtail its purchases of JGB by an amount of 400 billion yen for the October-December period. On that basis, its monthly purchase would stand at around 4.9 trillion yen. In more details, the purchase volumes of bonds issued at maturities falling in the 1-3 year band, 3-5 year band, and the 5-10 year band will be cut back by the BOJ; other maturities will remain unaltered.

These cuts are part of the BOJ's quantitative tightening plan launched in July to reduce its nearly $5 trillion balance sheet and incrementally exit the market of bonds, for which it had solely been posting numerous purchases in. By the first quarter of 2026, the central bank would reduce its monthly bond buys to about 3 trillion yen from around 6 trillion yen now, tapering by around 400 billion yen each quarter.

The BOJ last reduced monthly purchases of long-term bonds from 5.7 trillion yen in July to 5.3 trillion yen in August-September. At its policy meeting last month, the BOJ had maintained short-term interest rates unchanged as expected by markets.

The bank has mentioned it will act fast if it sees sharp spikes in yields of long-term bonds, indicating the central bank could revise its long-term bond-buying strategy at its future monetary policy meetings if necessary.