JAPAN: BoJ Halting Bond Taper Could Keep M-T Pressure On JPY
Jun-09 11:37
- The BOJ will consider halting its quarterly reductions in bond buying from April 2027 according to matching overnight sources reports, with an updated plan to be laid out at next week's meeting alongside an expected rate hike. This would be a dovish move, keeping JGB yields artificially low, which could add to pressure on the yen over the medium-term.
- The reports suggest that from April 2027 the BoJ could hold purchases flat at roughly Y2.1trn (USD13bln) per month, the level its current plan reaches by March 2027, rather than extending the Y200bln quarterly reductions adopted in April 2026 any further. Current BoJ JGB holdings still stand at Y530trn (49% of outstanding JGBs).
- Compared to a further tapering of bond purchases, this would keep the BoJ's holdings of JGBs more elevated, containing their yields. However, looking at continued high Japanese government debt levels and the Takaichi administration's loose fiscal policy, something will have to give - which may translate to continued pressure on the yen.
- The MoF has recently acted against yen depreciation through record levels of actual intervention and consistent verbal jawboning against speculative moves. USDJPY positioning and price action since then, with spot significantly narrowing the gap back to pre-intervention highs of 160.72, signals market's doubts around the ultimate feedthrough of these efforts.
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