The Bank of Japan (BOJ) may slow its bond purchase tapering due to financial market turbulence, offering relief to nervous bond investors as surging yields highlight fiscal strains and inflation pressures.
Sources familiar with BOJ thinking said the central bank has a high bar for outright market intervention but could signal a slowdown or pause in its quantitative tightening (QT) plans for the next fiscal year if conditions demand it.
The BOJ has been reducing its massive bond holdings, currently around 500 trillion yen, since 2024 under Governor Kazuo Ueda as part of normalizing monetary policy after decades of ultra-low rates.
The BOJ is expected to raise interest rates at its June 15-16 meeting to curb inflation but might signal less aggressive tapering due to global uncertainty.
Sources said there is little need to rush balance sheet reduction during market stress.
