Exploring the BOJ's Future JGB Purchase Path

Goldman Sachs forecasts that the BOJ will maintain its current JGB reduction plan through early 2027 and likely hold purchases steady at ¥2 trillion per month thereafter. This strategy balances the need for improved market functioning against fiscal and currency stability risks.

Key Takeaways

• 1.The Bank of Japan (BOJ) is expected to maintain its current JGB purchase reduction plan through March 2027, as market functioning is improving and short-term rates remain stable.
• 2.Post-April 2027, the BOJ is likely to sustain monthly JGB purchases at approximately ¥2 trillion to avoid political friction and risks of yen depreciation associated with debt monetization concerns.
• 3.Short-term interest rates have remained stable despite shrinking current account balances, suggesting liquidity remains abundant in the money markets.

Table of Contents

• I: Progress of the BOJ's JGB Purchase Reductions: Since Starting Purchase Reductions in August 2024, the BOJ Has Mechanically Implemented Reductions as Planned
• II: Interim Assessment Likely to Indicate Maintaining Current Plan Until Jan-Mar 2027
• III: JGB Purchase Plan from April 2027: Expect ¥2 tn/Month to Continue
• IV: The BOJ May Start to Gradually Increase JGB Purchases to Keep Reserve Balance-to-GDP Ratio Constant, from Around 2030
• Japan Main Economic Forecasts
• Recent Publications
• Disclosure Appendix

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