16.06.2025 01:11
The Bank of Japan (BoJ) is contemplating a significant adjustment to its government bond tapering strategy. According to the Japan News, the central bank is exploring a halving of the current tapering pace, commencing in April 2026. This would entail reducing the monthly decrease in Japanese government bond (JGB) purchases from approximately ¥400 billion to roughly ¥200 billion.
Currently, the BoJ gradually reduces its monthly JGB purchases by around ¥400 billion each quarter. However, this proposed alteration to the tapering schedule represents a considerable shift in policy, signaling a potentially more gradual exit from its years-long quantitative easing program. The BoJ will delve into this proposal, along with other policy options extending beyond April 2026, during its upcoming policy meeting on Monday and Tuesday.
Market response to this news has been somewhat muted but positive, with the USD/JPY exchange rate exhibiting a slight increase. At the time of writing, the USD/JPY pair is trading 0.19% higher at 144.38. This subtle movement suggests a degree of cautious optimism among market participants regarding the BoJ’s potential policy adjustment.
The BoJ, Japan's central bank, is responsible for setting monetary policy and maintaining price stability, aiming for approximately 2% inflation. Since 2013, the bank implemented an ultra-loose monetary policy, employing Quantitative and Qualitative Easing (QQE) to boost economic growth and combat deflation. This involved significant asset purchases, including government and corporate bonds, to inject liquidity into the market.
The BoJ's commitment to its ultra-loose monetary policy intensified in 2016, with the introduction of negative interest rates and yield curve control on 10-year government bonds. This strategy was reversed in March 2024, with the bank raising interest rates, marking a retreat from its ultra-loose stance. This significant policy shift, coupled with divergent policies from other major central banks, has resulted in substantial yen depreciation against other major currencies, particularly noticeable in 2022 and 2023. The widening interest rate differential between the BoJ and other global central banks further exacerbated this trend.
