BOJ May Pause 2027 Bond Taper as 10-Year JGB Yield Nears 3%

2 articles · Updated · Reuters · May 29

A pause in the Bank of Japan's bond taper in fiscal 2027 is emerging as the preferred option ahead of its June 15-16 policy meeting, according to sources familiar with the deliberations.
Bond volatility has strengthened that case: Japan's 10-year government yield hit 2.8% last week, a 30-year high, as inflation worries, fiscal concerns and uncertainty over the Iran war rattled markets.
Political pressure is also building because higher yields could constrain Prime Minister Sanae Takaichi's debt-funded spending plans and raise debt-servicing costs if yields move above the finance ministry's 3% budget assumption.
The BOJ is expected to keep its current taper plan through March 2027 unchanged, but investors are watching next year's blueprint and minutes from its May bond-market meeting for clearer signals.
Even without extra tapering, the BOJ's roughly 500 trillion yen bond holdings are still shrinking as maturing debt runs off, after its balance sheet has already fallen about 20% from its late-2023 peak.

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