BOJ Share of Outstanding JGBs
Understanding the Bank of Japan's massive JGB holdings, tapering strategy, and market implications
The BOJ Owns Half the JGB Market
After reading Section 3.6, you now understand what the Bank of Japan did over the past three decades: ZIRP, QE, QQE, NIRP, and Yield Curve Control. But policy history only tells part of the story. The more immediate question for anyone participating in the JGB market today is: How much of this market does the BOJ actually own?
The answer is staggering.
📊 Current BOJ Ownership (As of June 2025)
¥537.8 trillion in JGBs and Treasury Bills
50.9% of total outstanding JGBs (¥1,198.4 trillion)
Translation: The Bank of Japan owns more than half of Japan's government bond market.
This is the direct consequence of the policies you just learned about. When the BOJ committed to "unlimited" JGB purchases to defend the 0% yield target under YCC, this wasn't rhetorical—it was literal. The BOJ became the dominant buyer, dwarfing all other participants combined.
For context, at the start of Abenomics in 2013, the BOJ held just ¥89 trillion in JGBs, or roughly 11% of the market. In twelve years, holdings grew sixfold.
How Did the BOJ Accumulate So Much?
The BOJ's JGB holdings grew in distinct phases, each corresponding to the monetary policy regimes we covered in 2.22:
Phase 1: QQE “Shock and Awe” (2013-2016)
In April 2013, Governor Haruhiko Kuroda launched Quantitative and Qualitative Easing (QQE), committing to purchase ¥50 trillion per year in JGBs. This was later expanded to ¥80 trillion annually—equivalent to about 15% of Japan's GDP at the time.
- 2013 Starting Point: ¥89 trillion (11% of outstanding)
- 2016 Endpoint: ¥400 trillion (~40% of outstanding)
- Net Accumulation: ¥311 trillion in just three years
This pace of accumulation was unprecedented globally. The BOJ wasn't just influencing the market—it was becoming the market.
Phase 2: YCC “Unlimited Buying” (2016-2024)
In September 2016, the BOJ introduced Yield Curve Control (YCC), abandoning its ¥80 trillion annual target and instead committing to buy whatever quantity was needed to keep the 10-year JGB yield at "around 0%".
This policy shift had a paradoxical effect: because the market knew the BOJ would defend 0% at any cost, fewer participants tried to fight it. For several years (2017-2020), the BOJ's monthly purchases actually declined as yields stayed anchored near zero.
But when global inflation surged in 2021-2022 and other central banks hiked rates aggressively, the BOJ faced intense pressure. To defend the 0% cap, the BOJ resumed massive buying:
- 2021: ¥480 trillion (49% of outstanding)
- Peak (2022-2023): ¥590+ trillion (~53% of outstanding)
At the peak, the BOJ held more JGBs than the entire private sector combined.
Phase 3: Normalization and Tapering (2024-Present)
Following the March 2024 exit from YCC and the July 2024 announcement of quantitative tightening (QT), BOJ holdings have begun to decline slightly:
- June 2025: ¥537.8 trillion (50.9% of outstanding)
- Change from Peak: Down ~¥50 trillion
While this represents progress, it's important to recognize the scale: the BOJ still owns more than half the market, and this will remain true for years to come.
Breakdown by Maturity: Where Does the BOJ Own the Most?
The BOJ's holdings are not evenly distributed across the yield curve. Due to YCC's explicit focus on controlling the 10-year yield, the BOJ's ownership is concentrated in the medium-term segment.
| Maturity Segment | BOJ Ownership Ratio | Commentary |
|---|---|---|
| Short-term (1-5 years) | ~45-50% | High ownership, but less concentrated than 10Y segment |
| Medium-term (5-10 years) | ~55-60% | Highest concentration due to YCC's 10Y target |
| Long-term (10-25 years) | ~50-55% | Significant holdings, but BOJ prioritized 10Y |
| Super-long (25+ years) | ~35-40% | Lowest BOJ ownership; more private sector participation |
Why does this matter? The 5-10 year segment is the most liquid and actively traded part of the JGB market. With the BOJ owning 55-60% of this segment, the "tradable float" is severely constrained. Dealers struggle to source bonds for client orders, bid-offer spreads have widened, and price discovery has been impaired.
Average Maturity: The BOJ's JGB portfolio has an average maturity of approximately 6 years, reflecting the concentration in the 5-10Y zone.
The BOJ’s Quantitative Tightening (QT) Strategy
Having accumulated this massive position, how does the BOJ plan to reduce it?
July 2024 Announcement: Gradual Tapering
At its July 2024 Monetary Policy Meeting, the BOJ announced a plan to taper its JGB purchases—gradually reducing the pace of buying rather than actively selling holdings. The plan:
- Starting Point (July 2024): ¥5.7 trillion per month
- Reduction Pace: ¥400 billion per quarter
- Target (March 2026): ¥3.0 trillion per month
- Post-March 2026: Slower pace of ¥200 billion per quarter
| Period | Monthly Purchase Amount |
|---|---|
| July-September 2024 | ¥5.7 trillion |
| October-December 2024 | ¥5.3 trillion |
| January-March 2025 | ¥4.9 trillion |
| April-June 2025 | ¥4.1 trillion |
| July-September 2025 | ¥3.7 trillion |
| October-December 2025 | ¥3.3 trillion |
| January-March 2026 | ¥3.0 trillion (target) |
Hold-to-Maturity, Not Active Sales
Critical distinction: The BOJ is tapering purchases, not selling its existing holdings. As JGBs in the BOJ's portfolio mature, the BOJ receives principal repayment from the Ministry of Finance. The tapering plan means the BOJ will reinvest less of this repayment into new JGBs.
This is a much gentler approach than "active QT" (selling holdings back into the market), which would risk triggering a sharp yield spike. By letting holdings "run off" naturally through maturity, the BOJ minimizes market disruption.
Maturity Focus: Shorter Maturities First
The BOJ has prioritized reducing purchases of JGBs with residual maturities under 10 years, while keeping purchases of super-long (25+ year) JGBs relatively stable. This makes sense given:
- The 5-10Y segment has the highest BOJ ownership (~55-60%)
- Liquidity concerns are most acute in the medium-term segment
- The BOJ wants to restore a functioning market in the area it distorted most
Between July 2024 and April 2025, BOJ holdings fell by approximately ¥13 trillion, with the reduction entirely focused on the 10-year segment.
Market Implications: What Does This Mean for JGB Investors?
1. Liquidity Concerns
When one buyer owns half the market, liquidity suffers. This isn't theoretical—it's the daily reality for JGB traders in 2025.
Scarcity Effects:
- On-the-run issues: Newly issued JGBs trade at a premium because they're the only bonds dealers can reliably source
- Bid-offer spreads: Spreads widened post-YCC exit as dealers face higher inventory risk
- "Failed" trades: Instances where sellers can't deliver bonds because the BOJ owns them all
Repo market stress: The repo (repurchase agreement) market, which depends on dealers borrowing JGBs, has seen chronic scarcity. Repo rates have gone negative (lenders pay borrowers) for scarce issues, reflecting extreme demand to borrow bonds.
2. Price Discovery: Can Yields Be “Market-Determined”?
The BOJ ended YCC in March 2024, claiming it would allow market forces to determine yields. But can the market truly set prices when the BOJ owns 51%?
Post-YCC Reality:
- Volatility returned: Daily yield moves of 5-10 basis points are now common (vs. <1bp under YCC)
- But yields remain suppressed: The BOJ's passive holdings act as a "yield ceiling"—the sheer size of the BOJ's stock means there's less supply available to push yields higher
- Market structure distortion: With the BOJ as the permanent marginal buyer, private investors know yields can't rise "too much" without triggering BOJ intervention (even if informal)
Analogy: Imagine a used car market where the government owns 51% of all cars and refuses to sell them. Even if the government stops buying new cars, the fact that half the supply is locked away means prices will remain elevated. The JGB market faces the same dynamic.
3. Duration Risk Redistribution: Who Owns the Other Half?
If the BOJ owns 51%, who owns the remaining 49%? And as the BOJ tapers, who will absorb the new issuance?
| Holder Category | % of Outstanding JGBs | Commentary |
|---|---|---|
| Bank of Japan | 50.9% | Largest holder by far |
| Banks | ~12-14% | Constrained by capital requirements and IRRBB concerns |
| Insurance Companies | ~18-20% | Natural long-duration buyers, but capacity limits |
| Public Pensions (GPIF, etc.) | ~3-5% | Shifted to foreign bonds/equities; limited JGB appetite |
| Households | ~1-2% | Minimal direct holdings |
| Foreign Investors | ~7-9% | Growing interest post-YCC exit, but still small |
| Other (dealers, funds, etc.) | ~4-6% | Tactical positions, not long-term holders |
The Absorption Challenge: Japan issues approximately ¥190-200 trillion in JGBs annually (new issuance + rollovers). If the BOJ reduces its purchases from ¥5.7T/month to ¥3.0T/month, that's a ¥32 trillion annual reduction in BOJ demand. Who fills the gap?
- Banks? Post-YCC, banks faced massive interest rate risk in the banking book (IRRBB) as yields rose. Many are reducing JGB holdings to manage duration risk, not increasing them.
- Insurers? Japan's life insurance sector has huge JGB portfolios, but they're already heavily allocated and face their own duration management constraints.
- Foreign investors? Interest has grown (especially with yen-hedged yields attractive), but they still represent less than 10% of the market. Even a doubling would only absorb ~¥10 trillion.
Bottom line: Unless yields rise significantly to attract new buyers, it's unclear who will absorb the BOJ's reduced purchases. This is the central tension driving JGB yields higher in 2025.
4. Fiscal Implications: The Circular Flow
The BOJ's massive JGB holdings create a peculiar fiscal dynamic. When the BOJ owns ¥538 trillion in JGBs, the Ministry of Finance pays interest to the BOJ—but the BOJ then remits its profits back to the MOF as required by law.
The Circular Flow:
- MOF issues JGBs and pays interest (e.g., 1.0% on ¥538T = ¥5.4 trillion annually)
- BOJ receives the interest as the bondholder
- BOJ remits its net income to the MOF at year-end
- Result: A large portion of Japan's debt service is effectively paid to itself
Why this matters: Japan's published debt service costs understate the true burden. If/when the BOJ reduces its holdings (shifting ownership back to private investors), the government's real interest expense will rise, even if yields stay constant.
This is one reason why the BOJ faces political pressure to go slow on QT: faster tapering means higher real debt service costs for the government.
International Comparison: How Unusual Is This?
Central bank ownership of government debt is common—but the BOJ's 51% is in a league of its own.
| Central Bank | Holdings (% of Outstanding Gov't Bonds) | Context |
|---|---|---|
| Bank of Japan (BOJ) | ~51% | Result of decade+ of QQE and YCC; unprecedented in peacetime |
| European Central Bank (ECB) | ~25% | Down from 30% peak; actively tapering since 2022 |
| U.S. Federal Reserve | ~18-20% | Peak was ~30% in 2022; ongoing QT reducing holdings |
| Bank of England (BoE) | ~30% | Built up through QE post-2009; now in QT phase |
Key Insight: Even the ECB and BoE, which ran aggressive QE programs, never came close to the BOJ's 51%. The BOJ's ownership is double that of the Fed and ECB.
This extreme concentration reflects:
- The length of Japan's easing (30+ years vs. 10-15 for others)
- The intensity of YCC's unlimited commitment
- Japan's structural deflation problem requiring more aggressive intervention
Forward-Looking Questions
As the BOJ navigates quantitative tightening and the JGB market adjusts to a post-YCC world, several critical questions remain unanswered:
1. Can the BOJ Normalize Without a Yield Spike?
The BOJ's tapering plan assumes that private demand will gradually replace BOJ purchases. But if yields need to rise to, say, 2.0-2.5% to attract enough buyers, what happens to:
- Banks' IRRBB (interest rate risk in the banking book)?
- Insurers' asset-liability mismatches?
- The government's debt service costs?
A disorderly rise in yields could force the BOJ to pause or even reverse its tapering.
2. Will the BOJ Ever Sell?
The current plan is "hold to maturity." But at current issuance levels, it would take decades for the BOJ's holdings to decline meaningfully through natural runoff. Will the BOJ eventually need to actively sell JGBs to accelerate normalization?
Active selling is politically sensitive and market-disruptive. But without it, the BOJ may remain the dominant owner for a generation.
3. Will Foreign Investors Step In?
With Japan's policy rate at 0.50% (October 2025) and rising, yen-hedged JGB yields have become attractive to foreign investors. Foreign ownership has risen from ~7% to ~9% post-YCC exit.
But foreign investors are fickle—they'll only stay if yields remain attractive. Any yen strengthening or BOJ dovish pivot could trigger outflows.
4. Political Constraints on QT
Japan's government debt is 264% of GDP. Even a modest rise in yields translates to massive fiscal costs. Will politicians pressure the BOJ to slow or stop QT to protect the budget?
The BOJ's independence is enshrined in law (as of the 1998 reform), but political pressure is real. Governor Ueda has emphasized the BOJ's commitment to normalization—but how far can he go before political constraints bind?
Takeaway for JGB Market Participants
The BOJ's ownership of 51% of outstanding JGBs is the single most important structural fact about the JGB market today. It affects:
- Liquidity: Less tradable supply means wider spreads and higher transaction costs
- Pricing: Yields remain artificially suppressed relative to fundamentals
- Volatility: With a thin float, small order flows can cause outsized price moves
- Strategy: Portfolio managers must account for BOJ tapering pace and reinvestment decisions
As you move forward in this course—learning about JGB auctions (Chapter 4), trading (Chapter 5), and risk management (Chapter 6)—keep this structural reality in mind. You're not trading in a "free market." You're trading in a market where the central bank owns half the outstanding supply and is only slowly withdrawing.
Next up: In Section 3.8, we'll look at the Monetary Policy Meeting Schedule—when the BOJ meets, how decisions are communicated, and how to track the policy outlook going forward.
References
- Ministry of Finance, Japan. "Breakdown by JGB and T-Bill Holders (June 2025, Preliminary Figures)." Available at: https://www.mof.go.jp/english/policy/jgbs/reference/Others/holdings01.pdf.
- Bank of Japan. "Statement on Monetary Policy (July 31, 2024)." Available at: https://www.boj.or.jp/en/mopo/mpmdeci/mpr_2024/k240731a.pdf.
- Bank of Japan. "Japanese Government Bonds Held by the Bank of Japan." Available at: https://www.boj.or.jp/en/statistics/boj/other/mei/index.htm.
- ASEAN+3 Macroeconomic Research Office (AMRO). "Annual Consultation Report: Japan 2024 - Balancing Demand and Supply of Government Bonds post-BOJ's Tapering." March 2025.
- European Central Bank. "Public Sector Purchase Programme (PSPP)." Available at: https://www.ecb.europa.eu/mopo/implement/app/html/pspp.en.html.
- U.S. Federal Reserve. "Federal Reserve Balance Sheet: Factors Affecting Reserve Balances - H.4.1." Available at: https://www.federalreserve.gov/releases/h41/current/.