Analysis-BOJ could temper its taper as bond wobbles rattle markets

Market turbulence in Japan’s bond market may prompt the Bank of Japan to slow or pause its quantitative tightening, easing pressure on yields and supporting domestic markets such as the Japan 225. The BOJ, which has been trimming its roughly 500 trillion yen bond holdings under a 2024 QT plan, could signal a less aggressive taper at its June 15-16 meeting or when it outlines fiscal 2027 plans. Options under consideration include pausing tapering (keeping purchases near 2 trillion yen/month), maintaining the current pace (reducing purchases by 200 billion yen per quarter) or slowing to 100 billion yen per quarter. A soothing signal would calm jittery bond investors and limit further yield-driven funding stress, but intervention risks market perceptions of debt monetisation and large costs if defended.