FX.co ★ BoJ Weighs Slower Bond Taper to Ease Market Volatility

The Bank of Japan (BoJ) is contemplating a deceleration in its bond purchase tapering beginning next fiscal year to avert potential market disturbances, according to a Reuters report citing four sources. This consideration comes amid recent volatility in the Japanese government bond (JGB) market, where super-long yields have surged, driven by concerns over Japan's deteriorating public finances. While some officials within the BoJ advocate for maintaining the current pace of tapering to diminish the bank's presence in the market, others see advantages in easing the pace. The central bank is anticipated to make a decision at its policy meeting scheduled for June 16–17, during which the board will assess the current strategy and establish a new one for the period of April 2026 to March 2027. Market participants have proposed reducing the tapering scale to approximately 200 billion yen per quarter—down from the current 400 billion yen. Despite the BoJ's substantial holdings of JGBs, the recent market fluctuations have sparked concerns about an overly aggressive tapering approach. The central bank's objective remains to avoid unsettling the yield curve.