Table of Contents
This service uses statistical data published by the Bank of Japan, but the content of this service is not guaranteed by the Bank of Japan.
This service uses statistical data published by the Bank of Japan, but the content of this service is not guaranteed by the Bank of Japan.
The Bank of Japan's balance sheet at end‑March 2026 recorded total assets of ¥662.1 trillion, a substantial month‑on‑month contraction of ¥21.6 trillion. JGS holdings fell ¥15.8 trillion to ¥530.9 trillion, and the annual QT pace calculated on a 12‑month cumulative basis reached -¥45.1 trillion. With a policy shift scheduled for April to halve monthly JGS purchases from roughly ¥400 billion to ¥200 billion, structural changes in the final phase of passive QT have become pronounced. The ratio of current account balances to total assets rose to 69.4%, reversing after two months, and the growing volatility in the liquidity structure coincides with a slowing inflation rate (core‑core CPI y/y 2.5%), raising questions about consistency between balance sheet normalization and price dynamics.
According to the BOJ Statements of Account / BOJ Balance Sheet, JGS holdings declined ¥15.8 trillion month‑on‑month in March 2026 to ¥530.9 trillion. This monthly reduction exceeds December 2025's -¥15.4 trillion and is the largest monthly contraction observed in the sample period. The month‑on‑month series shows a clear seasonality: large declines in quarter‑end months (March, June, September, December) and small increases in other months.
From April 2025 onward, the month‑on‑month changes in JGS holdings were: April +¥2.3 trillion, May +¥2.5 trillion, June -¥13.2 trillion, July +¥1.4 trillion, August +¥2.8 trillion, September -¥14.9 trillion, October +¥1.4 trillion, November +¥1.6 trillion, December -¥15.4 trillion, January 2026 +¥1.2 trillion, February +¥1.1 trillion, March -¥15.8 trillion. The average decline in quarter‑end months is -¥14.8 trillion, while the average increase in other months is +¥1.9 trillion, reflecting concentrated maturities and a clear policy of reduced reinvestment.
The annual QT pace, computed as the 12‑month cumulative sum of month‑on‑month changes in JGS holdings, expanded from -¥41.8 trillion in February 2026 to -¥45.1 trillion in March 2026. This ¥3.3 trillion acceleration results from the March 2025 large decline (-¥12.6 trillion) exiting the 12‑month window while March 2026's -¥15.8 trillion was newly included. The annual QT pace first crossed -¥40 trillion in February 2026, indicating that passive QT has entered a qualitatively new stage.
Assuming the April policy shift (halving monthly purchases), the annual QT pace is likely to approach the -¥50 trillion level in the coming months. However, because the halving of purchases reflects a higher reinvestment ratio rather than a change in the pace of maturities, the annual QT pace is expected to decelerate from the second half of 2026.
Total assets stood at ¥662.1 trillion, a contraction of ¥67.7 trillion (‑9.3%) from the peak of ¥729.8 trillion in March 2025. Year‑on‑year the decline is -9.27%, confirming quantitative progress in BOJ balance sheet normalization. Month‑on‑month, March saw a large reduction of -¥21.6 trillion, the second‑largest after September 2025's -¥28.2 trillion.
The difference between month‑on‑month changes in total assets and month‑on‑month JGS changes is mainly explained by movements in loans outstanding and current account balances. Loans outstanding decreased ¥5.8 trillion in March to ¥77.7 trillion, contributing to the asset contraction. Loans outstanding are about 45% below their 2022 Q1 peak, indicating continued unwind of various operations.
The JGS ratio (to total assets) rose to 80.2%, up 0.2 percentage points from the prior month and 1.3 points from March 2025's 78.9%. This increase reflects that, while the absolute stock of JGS is falling, total assets are shrinking faster. In particular, the large decline in loans outstanding (¥96.8 trillion in March 2025 → ¥77.7 trillion in March 2026, -19.7%) has driven a relative rise in the JGS share.
Looking at the time series, the JGS ratio reached 80.0% in September 2025 and has since remained in the low‑80%s. This is a clear upward trend from 78.9% in March 2025 and indicates increasing concentration of the BOJ balance sheet in JGS. The structural outcome of rising JGS ratio despite ongoing QT implies that non‑JGS assets (notably loans outstanding) are shrinking faster than JGS.
The policy asset ratio — the sum of ETF, J‑REIT and corporate bond holdings as a share of total assets — was 6.0%, a slight increase from 5.9% in March 2025. By component: ETF holdings ¥37.1 trillion (5.6%), J‑REIT ¥0.7 trillion, corporate bonds ¥2.2 trillion. The ETF share rose 0.5 percentage points from 5.1% in March 2025, driven by the faster contraction of total assets.
Notably, ETF absolute holdings have turned slightly negative since January 2026: January -¥5.3 billion, February -¥25.6 billion, March -¥33.8 billion — three consecutive months of small declines. This likely reflects redemptions and mark‑to‑market effects and suggests ETF holdings may have peaked in net terms. The corporate bond ratio is 0.3%, half the 0.7% reported in March 2025, reflecting the phased reduction of CP and corporate bond purchase operations.
Loans outstanding were ¥77.7 trillion, down ¥5.8 trillion month‑on‑month, comprising 11.7% of total assets. Compared with ¥96.8 trillion (13.3%) in March 2025, loans outstanding fell ¥19.1 trillion (-19.7%) over 12 months. The loans outstanding ratio declined 1.6 percentage points from 13.3% in March 2025 to 11.7% in March 2026, contrasting with the rise in the JGS ratio.
The decline in loans outstanding reflects maturities and subdued new execution of special operations such as funds for strengthening growth foundations and support ops for disaster‑affected financial institutions. Loans outstanding fell sharply to ¥83.8 trillion in September 2025 (month‑on‑month -¥13.7 trillion) and then continued to decline to ¥79.5 trillion in December and ¥77.7 trillion in March. This suggests the BOJ has prioritized normalizing non‑JGS policy measures.
Current account balances were ¥459.7 trillion, down ¥1.4 trillion month‑on‑month. Because total assets shrank much more (-¥21.6 trillion), the current account balances / total assets ratio rose to 69.4%, an increase of 2.0 percentage points. The ratio reversed upward from a trough of 68.6% in January 2026, indicating heightened volatility in the liquidity structure.
Over the past 12 months the ratio fell from 72.7% in March 2025 to 68.6% in January 2026 (a decline of 4.1 points), then moved to 67.4% in February and 69.4% in March, showing instability. The increased volatility reflects asynchronous pace between total asset contraction and reductions in current account balances. Quarter‑end months tend to see large total asset contractions while reductions in current account balances are relatively smaller, mechanically pushing up the ratio.
Monthly changes in current account balances show a large increase of +¥12.7 trillion in April 2025, followed by declines of -¥10.9 trillion in May and -¥3.1 trillion in June, and a large drop of -¥21.6 trillion in September. Subsequent declines continued with -¥4.4 trillion in October, -¥10.7 trillion in November, -¥16.1 trillion in December, and slowed to -¥2.8 trillion in January 2026, -¥7.0 trillion in February, and -¥1.4 trillion in March.
Current account balances fell ¥70.7 trillion (-13.3%) from ¥530.4 trillion in March 2025 to ¥459.7 trillion in March 2026, a larger reduction than the -9.3% decline in total assets. This indicates liabilities contraction has proceeded faster than assets contraction. Nonetheless, current account balances remain roughly four times banknotes in circulation (¥116.3 trillion), so system liquidity remains very ample.
Banknotes in circulation were ¥116.3 trillion and have exhibited stability across the sample period. Cash demand reflects economic activity and payment preferences, so short‑term volatility is limited. The stability of banknotes in circulation indicates that the BOJ's balance sheet contraction has been achieved mainly through declines in current account balances, with minimal impact on currency circulation.
Monetary base (banknotes in circulation + current account balances) is ¥576.0 trillion, down ¥70.7 trillion (-10.9%) from ¥646.8 trillion in March 2025. This reduction is entirely due to the decline in current account balances, clarifying the structural source of monetary base contraction.
As of March 2026, BOJ total assets were ¥662.1 trillion, the FRB's were $6.66 trillion, and the ECB's were €6.16 trillion. Direct comparison is difficult due to currency differences, but evaluating normalization pace by year‑on‑year change rates shows BOJ at -9.27%. FRB and ECB data are only available from January 2026 in our sample.
For January 2026 year‑on‑year figures, BOJ was -8.26%; comparable FRB and ECB year‑on‑year data are not available here. BOJ's year‑on‑year contraction accelerated from -8.26% in January to -8.47% in February and -9.27% in March, confirming an increasing pace of passive QT.
BOJ's month‑on‑month change rate in March 2026 was -3.17%, a large contraction, second only to September 2025's -3.90%. The FRB showed a gradual expansion: 6.61 trillion in February, $6.66 trillion in March, with month‑on‑month changes of +0.30% (Jan→Feb) and +0.76% (Feb→Mar). The ECB showed contraction: €6.29 trillion in January, €6.23 trillion in February, €6.16 trillion in March, with month‑on‑month changes of -0.95% and -1.12%.
Comparing month‑on‑month rates across the three central banks in March 2026: BOJ -3.17%, FRB +0.76%, ECB -1.12%, confirming BOJ's fastest reduction pace. However, BOJ's seasonality—large negative in quarter‑end months and small positives otherwise—limits the interpretation of single‑month comparisons.
The BOJ pursues passive QT (stopping reinvestment of maturing securities) as its basic approach and does not engage in active JGS sales. The FRB has also adopted passive QT but total assets were increasing as of March 2026, suggesting a pause or easing of QT. The ECB has shown continuous contraction consistent with passive QT.
A distinctive feature of the BOJ is its substantial holdings of non‑sovereign policy assets (ETF, J‑REIT). An ETF ratio of 5.6% is unique among major central banks and increases exit complexity. Nonetheless, ETF absolute holdings have shown a slight declining trend, indicating gradual substantial normalization may be underway.
According to the Statistics Bureau, in February 2026 headline CPI y/y was 1.3%, core CPI (excluding fresh food) 1.6%, and core‑core CPI (excluding fresh food and energy) 2.5%. The core‑core index has fallen from 2.9% in December 2025 and 2.6% in January 2026, suggesting cooling underlying inflationary pressure.
The BOJ's price stability target is 2%; core‑core CPI at 2.5% exceeds the target by 0.5 percentage points. However, it has declined 0.6 points in five months from 3.1% in October 2025, a clear deceleration. That the BOJ is continuing rapid normalization at an annual QT pace of -¥45.1 trillion suggests a degree of confidence in the sustainability of reaching the price target.
The impact of BOJ balance sheet contraction on prices operates mainly through stock effects — reductions in JGS holdings increase upward pressure on long‑term yields. JGS holdings fell ¥45.0 trillion (‑7.8%) from ¥575.9 trillion in March 2025 to ¥530.9 trillion in March 2026, expanding room for long‑term yield increases.
However, a direct correlation between balance sheet changes and CPI is not evident in the observation period. Core‑core CPI rose from 3.0% in April 2025 to 3.1% in October 2025, then fell to 2.5% in February 2026, moving opposite to the acceleration in balance sheet contraction (annual QT pace from -¥41.8 trillion in February to -¥45.1 trillion in March). This suggests price dynamics are more strongly influenced by supply factors (energy prices, exchange rates) and demand factors (consumption trends) than by balance sheet size alone.
Cabinet Office coincident index (CI) data show the CI at 116.3 in February 2026, down 1.6 points from 117.9 in the prior month. The leading index was 112.4, up 0.3 points from 112.1, but the pace of improvement has slowed compared with the sharp rise from 110.5 in December 2025 to 112.1 in January 2026 (+1.6 points).
The coincident index moved from 115.7 in April 2025 to 117.9 in January 2026 then fell to 116.3 in February, indicating recent weakening. That the BOJ is pursuing rapid balance sheet normalization in this context suggests tightening effects from monetary policy are transmitting to the real economy.
METI's industrial production index (seasonally adjusted) was 102.2 in February 2025 (month‑on‑month +2.3%). However, available data extend only to February 2025, creating a substantial timing gap relative to the BOJ balance sheet analysis period (March 2026).
Within available data the production index fluctuated: 103.0 in October 2024 → 99.9 in January 2025 → 102.2 in February 2025, with no clear trend. More recent data are needed to robustly assess the relationship between BS normalization and production activity.
BOJ Tankan (Short‑term Economic Survey of Enterprises) shows the large‑manufacturing DI at +17 in 2026 Q1 (future +15) and large non‑manufacturing DI at +36 (future +28). The large‑manufacturing DI improved 4 points from +13 in 2025 Q2, indicating a moderate improvement in corporate sentiment.
Mid‑sized manufacturing DI was +16 (improved 6 points since 2025 Q2) and small manufacturing DI was +7 (also +6 points), showing improvement across firm sizes. This improvement in corporate sentiment suggests that, so far, the rapid BOJ balance sheet normalization has not excessively suppressed corporate activity.
Theoretically, BOJ balance sheet contraction should tighten financial conditions (higher long‑term and lending rates) and weigh on corporate sentiment. However, the improving Tankan DI trends appear inconsistent with this expectation.
Possible explanations include: (i) the pace of normalization is not yet rapid enough to materially affect corporate financing conditions; (ii) underlying economic resilience is offsetting tightening effects; (iii) firms have already priced in a move away from ultra‑low rates, limiting sentiment impacts. The forward DI is lower than current DI for large firms (15 vs 17, and 28 vs 36 for non‑manufacturing), indicating firms retain caution about future conditions and that continued BS normalization may contribute to uncertainty.
The rapid BOJ balance sheet contraction (annual QT pace -¥45.1 trillion, y/y -9.27%) is consistent with a normalization policy stance. Lack of call rate data precludes a quantitative assessment of short‑term rate policy interaction. Monetary base was ¥576.0 trillion, down -10.9% y/y, indicating quantitative tightening on the monetary side.
The April halving of JGS purchases (≈¥400 billion → ≈¥200 billion) can be interpreted as a de facto slowdown in QT. This suggests adjustments to the normalization pace are being made independently of interest‑rate policy. Maintaining rate normalization while slowing balance sheet normalization separates price (rate) effects from quantity (balance sheet) effects.
Core‑core CPI y/y 2.5% exceeds the BOJ's 2% target but is trending down. The theoretical channel for balance sheet contraction to reduce prices runs via higher long‑term yields → dampened demand → lower prices, but this relationship is not clearly observed in the sample.
The reduction in JGS holdings (-7.8%) affects long‑term yields through supply‑demand and expectation channels. Halving purchases from April should mitigate the supply shock to the JGS market and help contain abrupt yield spikes. This policy adjustment appears intended to reconcile sustained achievement of the price target with financial market stability.
Comparing BOJ, FRB and ECB reveals the following structural features:
Normalization pace divergence: BOJ's month‑on‑month contraction of -3.17% in March 2026 far exceeds the ECB's -1.12%, while the FRB expanded by +0.76% in the same month — BOJ is normalizing fastest.
Unique policy asset composition: BOJ's ETF ratio of 5.6% is uncommon among major central banks, complicating its exit strategy. FRB and ECB asset portfolios are dominated by government and agency securities, making normalization operationally simpler.
Convergence in QT method: All three central banks rely primarily on passive QT and avoid aggressive asset sales, reflecting a shared preference to avoid abrupt market shocks.
Economic environment differences: BOJ is tightening amid inflation above target (core‑core 2.5%) and improving corporate sentiment (large manufacturing DI 17). The FRB's shift to asset expansion may reflect different US macro conditions.
BOJ's JGS holdings of ¥530.9 trillion face valuation loss risk in a rising yield environment. If long‑term yields rise by 1 percentage point and duration is assumed to be 7 years, the valuation loss would be approximately ¥37 trillion (¥530.9 trillion × 7 years × 1%). However, the BOJ classifies JGS for hold‑to‑maturity purposes, so valuation losses would be unrealized.
Yield‑upside risk stems from: (i) domestic factors such as additional BOJ rate hikes or fiscal deterioration, and (ii) external factors such as US rate increases or global risk‑off events. Halving purchases from April is expected to moderate the supply shock to the JGS market and reduce the risk of abrupt yield spikes.
If the current annual QT pace of -¥45.1 trillion were to continue, JGS holdings would evolve as follows:
However, with the April halving of purchases, the annual QT pace is expected to slow to around -¥20 trillion in the second half of 2026. Under that slower pace, JGS holdings in March 2027 would be roughly ¥510 trillion, implying a more gradual decline than the projection above.
Returning JGS holdings to pre‑QQE (March 2013, ≈¥90 trillion) would take about 10 years at an annual QT pace of -¥45 trillion, or about 22 years at -¥20 trillion. Balance sheet normalization is therefore a very long‑term process, requiring durable policy commitment and flexibility.
Scenario 1: Domestic rate acceleration If inflation re‑accelerates (core‑core > 3%), the BOJ may raise rates faster than expected, causing rapid long‑term yield increases and enlarging valuation losses. This could necessitate a slowdown in balance sheet normalization (larger purchases). A sharp decline in current account balances could tighten short‑term liquidity and pose risks to financial stability.
Scenario 2: synchronized global QT If the FRB and ECB simultaneously accelerate QT, global liquidity would contract and upward pressure on yields could spread internationally. Even if the BOJ slows QT, spillovers from higher foreign yields could push domestic long‑term rates up, raising valuation loss risk and potentially triggering yen depreciation and import‑price inflation.
Scenario 3: recession and balance sheet re‑expansion If the coincident index continues to weaken and the economy enters recession, the BOJ may halt normalization and resume balance sheet expansion. In that case the QQE exit would be derailed, balance sheet enlargement would persist, and concerns about fiscal financing and currency credibility could re‑emerge.
From the March 2026 BOJ balance sheet analysis, the following policy implications arise:
Appropriateness of QT slowdown: An annual QT pace of -¥45.1 trillion is near the upper bound from the perspectives of price‑target durability and market stability. Halving purchases from April is a suitable adjustment to enhance sustainability of normalization.
Importance of liquidity management: Rising volatility in the current account balances / total assets ratio highlights liquidity management challenges. Authorities should monitor reserve levels to avoid excessive liquidity contraction.
Exit strategy for policy assets: The small decline in ETF holdings suggests the start of substantive normalization. Reductions should be executed very gradually to minimize market impact.
Communication strategy: Separating balance sheet normalization from interest‑rate policy risks market confusion. Clear explanation of policy intent and enhanced forward guidance are essential.
Need for international coordination: To mitigate risks from synchronized global QT, policy coordination and information sharing among major central banks are desirable. Balancing independent BOJ judgment with international consistency remains a challenge.
Passive QT: A method whereby a central bank allows its holdings of government securities and similar assets to decline naturally by stopping reinvestment of maturing securities. It contrasts with active asset sales (Active QT) and has the advantage of avoiding abrupt market shocks.
Annual QT pace: An indicator equal to the 12‑month cumulative sum of month‑on‑month changes in JGS holdings. It is used to quantify the speed of central bank balance sheet normalization, smoothing seasonal effects and revealing the trend pace of contraction.
Current account balances / total assets ratio: The share of current account balances (reserves held by financial institutions) in total central bank assets. It indicates the liquidity structure of the financial system; a decline implies reduced reserve balances and a tighter liquidity environment.
Policy asset ratio: The share of policy assets purchased as part of monetary easing — namely ETF, J‑REIT and corporate bonds — in total assets. In the BOJ context, it reflects the scale of non‑traditional policy measures and the complexity of exit strategies.
JGS ratio: The share of JGS holdings in total central bank assets. It is a core indicator of quantitative easing; an increase signals concentration in government securities, while a decrease indicates greater asset diversification.
Flow effect: The short‑term impact on market supply‑demand and price formation from monthly purchases or sales of securities by a central bank. Changes in the QT pace have important flow effects on market yields.
Stock effect: The medium‑ to long‑term effect of the accumulated stock of securities held by a central bank on long‑term yields and term premia. It evaluates the market impact of the absolute level of holdings.
Core‑core CPI: The consumer price index excluding fresh food and energy. It filters out volatile components to capture underlying inflation trends and is used in assessing the BOJ's 2% price‑stability objective.
Business conditions DI: An index from the BOJ Tankan that measures corporate sentiment. It is calculated as the share of firms reporting ‘favorable’ conditions minus the share reporting ‘unfavorable’ conditions; a widening positive DI indicates improving sentiment.
Monetary base: The total currency directly supplied by the central bank, defined as banknotes in circulation plus current account balances of financial institutions. Changes in the monetary base indicate shifts in the degree of monetary easing or tightening.
This column was automatically generated by AI integrating Bank of Japan balance sheet data (Statements of Account), Federal Reserve (FRED), and ECB statistics as a BOJ balance sheet analysis resource. This is not a recommendation to buy or sell any financial instruments. Please make investment decisions at your own responsibility and consult professionals as needed.