Bank of America Global Research previews the interim assessment of the JGB purchase reduction plan at the June MPM.

"We expect the Bank of Japan to maintain the current reduction plan through Q1 2027. Our base case is that monthly purchases to be held at around ¥2.1tn from April 2027 onward. Given the recent rise in yields and volatility, we think the BoJ will prioritize avoiding the risk of a further JGB selloff and providing opportunities for market participants to sell low-liquidity issues to the Bank, rather than continuing monthly reductions," BofA notes.

"Notably, even if purchases are held unchanged at ¥2.1tn from April 2027, the BoJ's balance sheet is still expected to shrink," BofA adds.