The Bank of Japan (BOJ) is poised to announce a reduction in super-long bond purchases as part of its bond-buying plan for the second quarter, which will be unveiled on March 31, 2025.

This anticipated cut aligns with the BOJ's quantitative tightening program that began in July 2023, aiming to reduce monthly bond purchases to 3 trillion yen by March 2026.

Despite speculation in the market regarding potential rate hikes leading to increased long-term rates, sources indicate that the BOJ will maintain its steady tapering process, with the 10-year yield recently hitting a 15-year high of 1.59%.

The central bank currently holds around 600 trillion yen in bonds, which constitutes about half of the outstanding Japanese Government Bonds (JGBs) and is equivalent to Japan's GDP.

Senior strategist Katsutoshi Inadome has suggested that any reduction in super-long bond buying could lead to a sell-off in those bonds.

Historically, the BOJ has concentrated on tapering shorter-dated bonds while continuing its purchases of super-long bonds.

At present, the BOJ purchases 4.5 trillion yen worth of bonds each month, with 450 billion yen specifically allocated to super-long bonds, which have maturities of 10 to 25 years.

Analysts believe that cutting back on super-long bond purchases would indicate a commitment to policy normalization, moving away from the decade-long stimulus program initiated by former Governor Haruhiko Kuroda in 2013.

In January 2025, the BOJ raised its short-term policy rate to 0.5% and has expressed a readiness to continue increasing rates if the economic conditions align with forecasts.

The current quantitative tightening program is expected to persist until March 2026, with further tapering plans to be assessed in June 2025.