Here’s how many government bonds the BoJ is actually buying right now

A rethink is required. Picture: Getty Images
  • The BoJ will announce its March monetary policy decision later today.
  • Speculation as to whether or not BoJ will drop pledge to buy a set amount of government bonds
  • Westpac Bank says the BoJ will leave policy unchanged on this occasion.

For several years the Bank of Japan (BoJ), as part of its quantitative and qualitative easing (QQE) program, has pledged to buy Japanese government bonds (JGBs) at an annual pace of around 80 trillion yen until inflation lifts back to its annual target of 2%.

However, it’s not been staying true to that pledge recently.

As seen in the chart below from Westpac Bank, it’s JGB purchases have been significantly less than 80 trillion yen, sitting around half that level for the best part of a year.

Source: Westpac

To some, the lower level of asset purchases suggests the BoJ may soon drop this annual purchase target, confident that its recently introduced yield curve control policy — buying enough bonds to keep 10-year JGB yields anchored at around 0% — has made the annual purchase target redundant.

Speculation continues to swirl as to when it may actually drop its annual JGB purchase target given it’s clearly not required at present.

While some think it’s only a matter of time until that occurs, Robert Rennie, head of Financial Markets Strategy at Westpac, says that pledge, or any other part of BoJ policy, is unlikely to change when the bank announces its March decision later today.

“The BoJ is likely to stick with current guidance on yield curve control and asset purchase program and thus push back on any expectations of a near term shift in policy,” he says, citing recent strength in the Japanese yen and escalation in trade tensions between the US and other major exporters.

The BoJ decision is expected to arrive at some point after 2pm AEDT.