Bank of Japan’s gradual reduction in JGB purchases since 2024 contributes to rising long-term interest rates and better market dynamics.
The Bank of Japan’s gradual reduction in long-term Japanese government bond (JGB) purchases since summer 2024 has led to a rise in long-term interest rates. The central bank attributes this increase partly to fundamental factors, including underlying inflation trends, alongside its policy adjustments.
JGB market functioning has improved as the BOJ scales back purchases, allowing interest rates to form more freely. Japanese investors, such as banks and households, have started increasing their JGB holdings, though portfolio adjustments are expected to take time.
The BOJ will continue monitoring market developments and portfolio shifts as it progresses with its purchase reductions. The policy aims to support market stability while fostering more natural rate formation.