BOJ may slow or pause bond taper at June meeting, analysts say

The Bank of Japan is considering slowing or suspending its bond purchase tapering programme at the June policy meeting, analysts say, as rising Japanese government bond yields and market volatility pressure its balance sheet normalisation plans.

The BOJ has been gradually reducing its monthly bond purchases since 2024 under Governor Kazuo Ueda's leadership, aiming to unwind decades of ultra-loose monetary policy. However, recent moves in the JGB market have complicated this process. Yields have risen sharply, reflecting both global rate dynamics and domestic expectations of further tightening. Market volatility has also increased, making it harder for the central bank to execute its tapering without causing disruptive price swings.

For foreign exchange and currency traders, the BOJ's bond tapering decisions have direct implications for the yen. A slower taper or pause could be seen as a less hawkish stance, potentially weighing on the yen as rate differentials with the US and other major economies remain wide. Conversely, any signal of continued tightening could support the yen. Traders can track real-time yen movements and JGB yield changes on NowPrice's live forex dashboard to gauge market reactions.

Looking ahead, the focus will be on the BOJ's June meeting and any accompanying guidance on the pace of balance sheet reduction. Key data releases, including Japanese inflation and GDP figures, will also shape expectations. Market participants will watch for any shift in the BOJ's language regarding yield curve control or the timing of further rate hikes, as these could trigger significant moves in USD/JPY and other yen crosses.