BOJ to Survey Bond Markets to Shape Central Bank Policies

The Bank of Japan (BOJ) is conducting a survey of Japanese government bond (JGB) market participants regarding its bond-tapering plans, according to three sources familiar with the matter. The survey's findings are expected to inform discussions at the BOJ's meetings with bond market participants scheduled for July 9-10. These sources, who requested anonymity due to the private nature of the matter, indicated that the survey would help shape the central bank's approach to reducing its substantial bond holdings.

The BOJ has announced its intention to start tapering its extensive bond-buying program and decrease its holdings, which currently stand at 589 trillion yen ($3.7 trillion), representing roughly half of the total JGBs available in the market. Before finalizing the details on how it plans to scale back its bond purchases over the next one to two years, the BOJ aims to gather input from bond market participants.

The survey is directed at various market participants, including banks, brokerage firms, and life insurance companies, seeking their expectations concerning the extent and pace of the tapering process. When queried by Reuters, the BOJ confirmed it is reaching out to all participants of the upcoming meetings to collect their views on the amount, pace, and framework for the planned reductions.

As the BOJ reduces its presence in the bond market, there is an increased need for the government to secure stable buyers of JGBs to prevent a potential selloff that could lead to a damaging spike in yields. A finance ministry panel has emphasized the importance of creating an environment where government bonds remain attractive to financial institutions, possibly by issuing shorter-duration debt.