Japan long-term yields hit 27-year high as BOJ trims JGB buying to lowest since 2013
The Bank of Japan's fiscal 2025 operations report shows long-term rates reaching levels unseen since 1999 while monthly bond purchases fell to their smallest volume in over a decade, underscoring the depth of monetary normalization.
Long-term Japanese government bond yields climbed to the 2.35–2.40 percent range in late March 2026, the highest since February 1999, as the Bank of Japan pressed ahead with interest-rate increases and the steepest reduction in bond buying since quantitative easing began. The figures come from the BOJ's annual market operations report for fiscal 2025, published on August 12.
Monthly JGB purchases fell to 2.9 trillion yen in the January–March 2026 quarter, bringing the quarterly total to 8.7 trillion yen. That is the lowest purchase volume since the Bank launched quantitative and qualitative monetary easing in April 2013.
Rate path and market pricing
The BOJ held its uncollateralized overnight call rate at around 0.5 percent through most of fiscal 2025 before raising it to 0.75 percent at the December 2025 monetary policy meeting. The Bank cited solid economic and price data for the move, and market participants subsequently pushed expectations for future policy rates higher.
The report attributes the sharp rise in long-term yields to three forces: the December rate increase, upward repricing of the future policy path, and inflation vigilance triggered by higher crude oil prices amid escalating Middle East tensions through the fiscal year-end. Uncertainty over U.S. trade policy and speculation about Japan's fiscal stance added volatility along the way.
Tapering schedule
Following an interim assessment at the June 2025 meeting, the BOJ confirmed it would cut monthly JGB purchases by roughly 400 billion yen per quarter through January–March 2026, then slow the pace to about 200 billion yen per quarter from April–June 2026. The stated goal is a monthly purchase volume of around 2 trillion yen by January–March 2027. Reductions were concentrated in maturity segments where the BOJ's share of monthly issuance was largest.
ETF and J-REIT disposals begin
In a further step away from the QQE era, the Bank began selling exchange-traded funds and Japanese real estate investment trusts in January 2026, following guidelines set at the September 2025 meeting. The report does not specify volumes sold, but the move marks the first active disposal of risk assets accumulated over more than a decade.
Money-market plumbing
The overnight call rate stayed stable just below the Complementary Deposit Facility rate throughout the year, supported by regional banks arbitraging the spread between excess-reserve remuneration and call-market funding. General collateral repo rates edged higher in the second half of the fiscal year as bond supply-demand conditions eased and FX-swap-driven demand from overseas investors softened.
The total number of BOJ market operations fell to 799 in fiscal 2025, down from 879 a year earlier and the fewest since fiscal 2013.
For fixed-income investors, the combination of a 27-year yield high, a shrinking central-bank bid, and the start of ETF disposals signals that Japan's bond market is repricing for a structurally different regime. Portfolio managers with duration exposure to JGBs face a landscape where the BOJ is no longer a price-insensitive buyer, and further rate increases remain on the table.
