Bank of Japan sets aside maximum provision of losses for bond transactions
The moves come as the Japanese central bank faces mounting pressure to keep hiking borrowing costs, after it kept short-term interest rates steady in its May meeting
[BENGALURU] The Bank of Japan (BOJ) has set aside the maximum provision for losses on bond transactions, a spokesperson for the central bank said on Monday (Jun 2).
The level of the provision for possible losses on bond transactions was 100 per cent for fiscal 2024, the spokesperson said in an e-mailed response to Reuters.
The moves come as the Japanese central bank faces mounting pressure to keep hiking borrowing costs, after it kept short-term interest rates steady in its May meeting.
The BOJ has usually kept a target of provision for losses on bond transactions around 50 per cent of gains or losses from the transactions.
The Nikkei first reported BOJ setting aside maximum provision for losses on bond transactions earlier on Monday.
The provisions are funded with income from bond and other transactions, the Nikkei newspaper reported.
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Bond taper pace
Further on Monday, minutes of a meeting between the BOJ and financial institutions showed that the bank has received a sizeable number of requests to maintain or slightly slow the pace of tapering in its bond purchases from fiscal year 2026 onwards.
Despite a recent spike in super-long yields, a significant number of bond market participants also urged the central bank to leave unchanged its existing bond taper plan running through March 2026, the minutes showed.
The requests, made at the BOJ’s meeting with bond market participants on May 20-21, heighten the chance that the BOJ will proceed slowly in reducing its huge balance sheet.
“From the viewpoint of predictability, the bank should maintain the current pace of the reduction,” one participant was quoted as saying in the minutes on the BOJ’s bond taper plan for April 2026 onwards.
The BOJ has been slowing bond purchases since August last year to halve monthly buying to 3 trillion yen (S$27 billion) by March 2026.
The opinions will be taken into account at the central bank’s next policy meeting on Jun 16-17, when it will conduct a review of its current taper plan and come up with a programme for fiscal 2026 onwards.
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