BOJ May Pause Bond Taper in Fiscal 2027 Amid Market Volatility, Sources Say

The Bank of Japan is likely to pause its bond-buying tapering in the fiscal year starting April 2027, as volatile markets and political pressure to contain rising yields mount, according to sources familiar with the central bank’s deliberations. The BOJ, which currently reduces monthly bond purchases by 200 billion yen quarterly, will outline its taper plan for fiscal 2027 at its June 15-16 policy meeting. While no final decision has been made, two sources said a pause is increasingly favored due to jitters from the Iran war and its impact on bond markets. Japan’s 10-year government bond yield hit a 30-year high of 2.8% last week, nearing the 3% level that would strain Prime Minister Sanae Takaichi’s spending plans. A BOJ survey also showed investors calling for a pause. Analysts say a combination of a rate hike to 1% and a taper halt could stabilize yields while addressing inflation risks. The BOJ’s balance sheet has already shrunk 20% from its 2023 peak as maturing bonds run off.