OR Bank of Japan (Boj) left the unchanged interest rate her reference and presented a plan to slow down her withdrawal from the bond market from next year, in a indication of cautiousness after increased market volatility.
The Board of Directors of the Bank of Japan, led by Commander Kazo Wenta, has consistently maintained its reference rate at 0.5% at the end of a two -day session, according to today (17.6.2025).
The Central Bank plans to reduce the pace at which it cuts the monthly bond purchases from the following financial year to quarterly reductions of $ 200 billion ($ 1.34 billion) from current 400 billion yen, the bank said.
This will reduce the volume of monthly purchases to about 2 trillion. Yen in general in the first quarter of 2027, about the same amount that the bank bought to secure market liquidity before launching a huge monetary relaxation program in 2013.
The Board of Directors’ cautious approach was expected by most Boj observers following the recent JGBS volatility, which extended to all global debt markets. GEN GENwhile remained in a narrow trading range after the decision. The reaction to the bonds was mildwith the future reference contracts receding slightly, along with the shorter shorter titles, while the over -term duration were slightly changed.
After more than a decade as the largest buyer of government bonds in Japan, the central bank must carefully grave its exit from the market in order not to scare investors during the process.
All 53 economists who participated in Bloomberg’s survey expected that interest rates would remain unchanged at the meeting, while two -thirds expected that Boj would slow down the reduction in bond markets.
In a picture of the Central Bank’s determination to continue moving out of the market and remain on a largely predictable course, Boj has confirmed that it will continue with its existing plan to reduce monthly purchases by 400 billion yen every quarter before the new plan.
Traders will be watching to see if the central bank’s shift to smaller reductions in next year’s plan helps to calm the market. The Ministry of Finance may also provide some reassuring information to investors in the coming days if it marks a decrease in the issuance of over -term bonds, as economists expect.
The bank maintained a line in its announcement indicating its readiness to intervene in the event of a sharp increase in bond yields, although since last year the bar for such an action seems to be much higher than on the days of the Curve Control Program.
Over the years, other central banks, including the US Federal Bank (FED), have also regulated the rate of quantitative tightening. BOJ remains far behind its global counterparts in dealing with the size of its assets.
BOJ balance sheet size in relation to Japan’s production is about 120%, much larger than that of the Fed and the European Central Bank compared to the economies of their respective nations.
Boj began to reduce its bond markets in August, five months after abandoning the negative interest rates control and yield curve. Wenta has repeatedly stated that bond yields should be determined by the market, since Boj’s mass markets and the control of yields have prevented market functionality.
With the bond purchase plan now clarified, Boj observers’s attention will turn to the timetable of the next interest rates.