The Bank of Japan is weighing a pause to its bond-buying tapering program after March 2027, according to BNY strategist Bob Savage. Under the plan being discussed, monthly JGB purchases would stabilize near 2.1 trillion yen rather than continuing to decline, allowing the central bank’s balance sheet to shrink naturally through bond maturities instead of active reduction. This signals a measured approach to unwinding years of ultra-loose monetary policy.
Meanwhile, markets should prepare for a rate hike at the June BoJ meeting, with policy rates expected to rise to 1.0 percent. The dual message reveals the central bank’s delicate balancing act as it normalizes policy without disrupting financial stability or economic recovery.
The yen could see increased volatility as traders digest the timeline for both tapering adjustments and rate normalization. Any deviation from these expectations in upcoming BoJ communications will likely trigger sharp currency movements.
FXnCO Insight
Position for potential yen strength into June while monitoring BoJ official guidance on the 2027 tapering pause for medium-term directional cues.
Source: FXStreet