Impact of the Bank of Japan's Reductions in JGB Purchases on the JGB Markets
August 4, 2026
Monetary Affairs Department
Financial Markets Department
Abstract
Since summer 2024, the Bank of Japan has been gradually reducing its outright purchase amount of long-term Japanese government bonds (JGBs), based on a plan decided at its Monetary Policy Meeting (MPM), so that the Bank can improve the functioning of the JGB markets in a manner that supports stability in the markets. While the impact of these reductions on interest rate formation has gradually realized, it is suggested that the recent rise in long-term interest rates has been driven, to a certain extent, by fundamental factors such as the rise in the underlying inflation. The functioning of the JGB markets has been steadily improving as the Bank makes progress in reducing its JGB purchases, with long-term interest rates being formed more freely in the financial markets. While Japanese investors such as banks and households have gradually increased their JGB holdings, such portfolio adjustments are likely to take some time. The Bank going forward will continue to carefully monitor developments in these portfolio adjustments as well as trends in the JGB markets and their functioning as such progress unfolds.
Notice
The Bank of Japan Review Series is published by the Bank to explain recent economic and financial topics for a wide range of readers. This report, 2026-E-10, is a translation of the Japanese original, 2026-J-11, published in August 2026. If you have any comments or questions, please contact the Monetary Affairs Department (E-mail: post.mad7@boj.or.jp).