BOJ slashes government bond purchases post policy overhaul

BOJ bond reduction: The Bank of Japan (BOJ) announced on Tuesday to scale back its purchases of government bonds following a shift in its policy stance away from negative interest rates and the abandonment of yield curve control (YCC).

Under the new directives, the BOJ will notably decrease the upper limit of the range for the volume of bonds it intends to buy in each round of bond buying operations.

Specifically, the central bank has trimmed the upper limit for purchases of 5-10 year JGBs to 550 billion yen from 900 billion yen. Similarly, for 3-5 year bonds, the upper limit has been reduced to 500 billion yen from 750 billion yen. The frequency of bond buying operations across the yield curve will remain unchanged.

The BOJ has engaged in extensive bond purchases to uphold its ultra-low rate policy, leading to its ownership in the market surpassing 50 per cent. This has resulted in a tightening of liquidity and disruptions in market functionality.

This announcement coincides with the BOJ's decision to terminate its negative interest rate policy and abandon bond yield control in its most recent meeting, marking the beginning of a new chapter in Japan's monetary policy.

(With Reuters Inputs)