JGB Market Research Hub

The JGB market is currently defined by the Bank of Japan's strategic transition toward tapering its monthly purchase schedule, with analysts projecting a reduction to a ¥2 trillion pace by early 2027. This trajectory is intended to align with rising policy rates and mitigate concerns regarding 'debt monetization' while maintaining a healthy market environment where short-term liquidity remains ample. Macroeconomic indicators support this measured approach, as Tokyo's core CPI is expected to cool to +1.8% alongside weakening industrial production, providing a backdrop of relatively benign inflation. Despite the upward pressure on yields, domestic institutional investors, including insurers and regional banks, have emerged as key net buyers in the super-long and medium-term sectors. Conversely, foreign investors have been observed unwinding flattener trades by selling super-long bonds, while trust banks are increasing JGB holdings to rebalance portfolios following equity price gains. Looking toward 2030, researchers suggest the BOJ may eventually need to increase purchases again to maintain a target reserve-to-GDP ratio of approximately 35%. Overall, the market shows signs of adapting to a higher yield environment even as structural shifts in domestic asset allocation begin to influence yen stability.