Signal of monetary policy shift? The Bank of Japan will reduce purchases of super-long bonds next quarter, with the purchase amount down 15% quarter-on-quarter.

The Bank of Japan has announced that it will reduce the scale of ultra-long-term bond purchases next quarter. According to a statement released on Tuesday, the Bank of Japan will purchase 345 billion yen (about $2.3 billion) of bonds with maturities of 10 to 25 years each month next quarter, lower than this quarter’s 405 billion yen—a 15% month-over-month decrease in purchase volume. The Bank of Japan’s monthly bond purchases for all maturities are expected to fall from 3.705 trillion yen this quarter to 3.3 trillion yen next quarter, indicating a further move away from an accommodative monetary policy. Increasingly, market participants expect the Bank of Japan to raise interest rates again in October. Masatoshi Inatome, senior strategist at Sumitomo Mitsui Trust Asset Management, said the Bank of Japan’s reduction in bond purchases was slightly larger than expected and may have a mildly bearish impact on the bond market. Although purchases of bonds with maturities of 10 to 25 years and all maturities are decreasing, the purchase scale for bonds maturing in over 25 years will remain at 150 billion yen. Ryutaro Kimura, senior fixed income strategist at AXA Investment Managers, said the Bank of Japan maintaining its purchase scale for bonds maturing in over 25 years helps stabilize the ultra-long-term Japanese government bond market. He stated: “Investors will interpret this as the Bank of Japan cautiously avoiding another period of instability for ultra-long-term Japanese government bonds, as occurred in May this year.” Recently, Japanese bonds with maturities above 10 years have taken a beating, with declines of more than 9% so far this year—more than double the drop for bonds of other maturities. This sell-off is driven by multiple factors: stubborn inflation is forcing the market to reprice long-term interest rates, life insurers—major holders—are reducing demand, and political turmoil has stoked concerns about the government expanding fiscal expenditure, putting extra pressure on ultra-long-term bonds. Risk Warning and Disclaimer The market involves risks, and investments should be made cautiously. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions expressed in this article are suitable for their particular circumstances. Investment based on this article is at your own risk.