Bank of Japan Quietly Tightens Monetary Policy
The Bank of Japan is taking steps toward quantitative tightening, though not through direct sales of its government bond holdings. Instead, the central bank is reducing new purchases, allowing maturing bonds to naturally shrink its portfolio.
The policy involves gradually cutting monthly purchases of long-term government bonds starting in 2024. This approach means the bank’s total holdings will decline as maturing bonds exceed new acquisitions.
In addition to bonds, the Bank of Japan has started selling exchange-traded funds (ETFs) and real estate investment trusts (J-REITs). This marks a shift from its previous expansive monetary policies.
The bank’s government bond holdings have already decreased by several trillion yen from their peak, reflecting the new direction in monetary strategy.