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-April 2026 stood at ¥663.3 trillion, an increase of ¥1.1 trillion from the prior month. JGS holdings were ¥531.9 trillion, a marginal rise of ¥1.1 trillion month-on-month, and the annual QT pace remains a ¥46.3 trillion reduction. Notably, current account balances rose by ¥9.7 trillion to ¥469.4 trillion, the first large increase in four months since December 2025. This observation is the first since the start of the policy in April 2026 that halved monthly JGS purchases (approx. ¥400 billion → approx. ¥200 billion), and may indicate signs of change in the liability-side liquidity structure. The ratio of current account balances to total assets improved 1.4 percentage points to 70.8% from 69.4% in the prior month.
According to the BOJ Statements of Account / BOJ Balance Sheet, the month-on-month change in JGS for April 2026 was +¥1.1 trillion (+¥1,079.3 billion), reversing March's large decline (-¥15.8 trillion). This pattern reflects the typical maturity-arrival cycle, with large declines at quarter-ends followed by small increases the next month. Over the past 12 months, large quarter-end decreases of ¥13.2 trillion to ¥15.8 trillion occurred in June, September, December and March, while other months showed small increases or marginal rises of ¥1.1 trillion to ¥2.8 trillion.
The 12-month cumulative of month-on-month JGS changes, which indicates the annual QT pace, is -¥46.3 trillion, an expansion of the contraction by ¥1.2 trillion from -¥45.1 trillion in the prior month. This reflects the inclusion of March 2026's large decline (-¥15.8 trillion) into the 12-month moving window and the exit of April 2025's increase (+¥2.3 trillion) from the window. The monthly average implies a reduction pace of about ¥3.9 trillion, indicating steady progress of passive QT (stopping reinvestment of maturing securities).
April 2026 is the initial month of the policy shift halving monthly JGS purchases from approx. ¥400 billion to approx. ¥200 billion. However, April's month-on-month JGS +¥1.1 trillion corresponds to the usual non-quarter-end cycle pattern, so it is difficult to identify a direct impact of the policy shift from a single month. A comprehensive evaluation of policy effects will require accumulation of data over the coming months.
Theoretically, halving monthly purchases would add roughly ¥2.4 trillion of annual balance sheet reduction (¥200 billion × 12 months), which corresponds to about a 5% acceleration relative to the current annual ¥46.3 trillion pace. However, compared with the variability of maturities (quarter-end ¥13–16 trillion vs non-quarter-end ¥1–3 trillion), this is relatively small and likely to have a limited effect on the overall QT pace.
Total assets were ¥663.3 trillion, up ¥1.1 trillion (+0.17%) month-on-month. Year-on-year the balance remains substantially reduced by -9.29%, shrinking by ¥68.0 trillion from ¥731.2 trillion in April 2025. From the peak (May 2025 ¥733.6 trillion), cumulative shrinkage has reached ¥70.3 trillion, about a 9.6% contraction.
Monthly movements show large quarter-end declines of ¥16.1 trillion to ¥28.2 trillion in June, September and December 2025 and March 2026, while other months fluctuated within ±¥0.9 trillion to ¥5.1 trillion. This pattern reflects concentration of JGS maturities at quarter-ends and indicates the mechanical progression of passive QT.
JGS holdings totaled ¥531.9 trillion, representing 80.2% of total assets, unchanged from the prior month. This ratio has risen 1.1 percentage points from 79.1% in April 2025, confirming that JGS has maintained a relatively large share amid total asset contraction. This reflects that ETFs and loans outstanding are shrinking faster than JGS.
Year-on-year JGS holdings declined -8.0% (-¥46.4 trillion), a somewhat slower pace of reduction than total assets' -9.29% year-on-year. From the peak (May 2025 ¥580.7 trillion), cumulative decline in JGS holdings is ¥48.8 trillion, about an 8.4% reduction.
Long-term JGS account for essentially the entirety of JGS holdings; no short-term government paper holdings are identified. This continues to reflect the BOJ's QQE stance emphasizing large-scale purchases of long-term JGS to influence the entire yield curve.
Policy assets (ETF + J-REIT + corporate bonds) totalled ¥39.8 trillion, remaining 6.0% of total assets, unchanged month-on-month. The breakdown is ETFs ¥37.1 trillion (5.6%), J-REITs ¥0.7 trillion (0.1%), and corporate bonds ¥2.0 trillion (0.3%).
ETF holdings decreased slightly by ¥0.03 trillion (¥27.9 billion) month-on-month, marking the fourth consecutive small monthly decline since January 2026. This likely reflects market valuation changes and natural declines from redemptions under a halt to new purchases. J-REITs and corporate bonds show similar modest declines, indicating a gradual contraction of policy assets overall.
The policy asset ratio of 6.0% is up 0.2 percentage points from 5.8% in April 2025, meaning these assets have maintained a relatively high share amid total asset contraction. Coupled with the rise in the JGS ratio (79.1% → 80.2%), this suggests that the sharp contraction in loans outstanding is driving changes in asset composition.
Loans outstanding stood at ¥77.7 trillion, unchanged month-on-month, representing 11.7% of total assets, also unchanged. Year-on-year loans are down ¥19.8 trillion (-20.3%), a roughly 20% contraction from ¥96.8 trillion in April 2025.
From the peak in 2022 Q1, loans outstanding have declined by about 45%, indicating phased withdrawal of various funding-supply operations. Monthly patterns show large quarter-end declines of ¥4.3 trillion to ¥8.4 trillion, likely driven by natural decreases in operation balances as funding demand eases at quarter-ends.
The fall in the loans outstanding ratio (13.2% in April 2025 → 11.7% in April 2026) is closely related to the rise in the JGS ratio, suggesting that the BOJ’s balance sheet is reverting from crisis-era liquidity provision toward a structure centered on JGS holdings.
Current account balances rose to ¥469.4 trillion, a large month-on-month increase of ¥9.7 trillion (+2.1%). This is the first increase in four months since December 2025 and marks a reversal from the declining trend that continued since September 2025. From May 2025 to March 2026, current account balances decreased for 10 consecutive months, cumulatively shrinking by ¥73.8 trillion (from ¥543.2 trillion to ¥459.7 trillion).
The ratio of current account balances to total assets increased to 70.8%, up 1.4 percentage points from 69.4% in the prior month. This ratio had trended down from 74.3% in April 2025 but turned upward in April 2026 for the first time, an important signal that may indicate changes in the liability-side liquidity structure.
Year-on-year current account balances remain down -13.6% (-¥73.8 trillion), so the structural downward trend in reserve balances accompanying QT continues. Nonetheless, the monthly reversal may reflect the fading of quarter-end effects or changes in banks’ reserve demand.
Banknotes in circulation stood at ¥116.8 trillion. The provided data do not allow direct month-on-month comparison, but the past 12-month path is estimated to be relatively stable. Banknotes account for 17.6% of total assets and, together with current account balances at 70.8%, constitute the main components of the monetary base.
The level of banknotes in circulation reflects demand for cash; despite advancing cashless trends, a steady balance persists. This likely reflects persistent cash-use preferences and demographic factors such as an aging population.
The data do not directly provide the monetary base, but summing current account balances ¥469.4 trillion and banknotes in circulation ¥116.8 trillion yields an estimated monetary base of roughly ¥586 trillion. This implies an approximate year-on-year decline of about 10%, consistent with a steady reduction in the monetary base as QT progresses.
The April increase in current account balances (+¥9.7 trillion) affects month-on-month fluctuations in the monetary base, suggesting micro-adjustments to liquidity provision within the QT environment.
According to Federal Reserve Bank of St. Louis (FRED) data, FRB total assets in April 2026 were 6.70 trillion USD, a month-on-month increase of +0.60% (+0.04 trillion USD). ECB total assets were 6.22 trillion EUR, up +0.97% month-on-month (+0.06 trillion EUR), per the European Central Bank Statistical Data Warehouse.
Compared with the BOJ's ¥663.3 trillion month-on-month +0.17%, all three central banks registered small increases in April, indicating a temporary expansion phase amid global QT. However, year-on-year contractions differ: BOJ -9.29%, FRB about -1.5% (estimate), ECB about -2.0% (estimate), so the BOJ’s reduction pace remains the most rapid.
The BOJ relies primarily on passive QT (stopping reinvestment of maturing securities) while implementing a policy change in April 2026 that halved monthly JGS purchases. This can be characterized as a de facto QT slowdown aiming to balance market functioning with interest-rate normalization.
The FRB also mainly adopts passive QT but uses a “cap-limited passive QT” by setting monthly caps (Treasuries USD 60 billion, MBS USD 35 billion) for reinvestment stops. The ECB is pursuing a phased reduction of its Asset Purchase Programme (APP) and employs a “hybrid” approach with partial reinvestment of maturing assets.
All three central banks expanded balance sheets significantly in response to the 2020–2021 pandemic and moved into QT from 2022 onward. The BOJ, however, after YCC adjustments in 2023 and exit from negative interest rates in 2024, entered an accelerated QT phase from 2025 onward, so its normalization began later but has proceeded more rapidly than the FRB and ECB.
The BOJ’s year-on-year -9.29% contraction is markedly faster than the FRB/ECB estimated -1.5% to -2.0%, indicating a “late start, rapid progress” normalization trajectory for Japan.
According to the Ministry of Internal Affairs and Communications CPI data, March 2026 headline CPI was +1.5% year-on-year, core CPI +1.8%, and core-core CPI +2.4%. The core-core CPI remains above the BOJ’s 2% price-stability target but has declined from the peak of +3.0% in November 2025.
From May 2025 to March 2026, headline CPI fell from +3.5% to +1.5%, core CPI from +3.7% to +1.8%, and core-core CPI from +3.3% to +2.4%. This deceleration in inflation suggests that the BOJ’s balance sheet normalization (annual pace ¥46.3 trillion) and interest-rate normalization may be exerting disinflationary pressure.
Nevertheless, core-core CPI at +2.4% remains above target, leaving room for continued balance sheet normalization and potential additional tightening. The BOJ’s decision in April 2026 to halve JGS purchases can be interpreted as prioritizing market functioning while recognizing that inflation is converging toward the target range.
Under standard BIS-type frameworks, balance sheet contraction affects inflation via two channels. First, a flow effect: reduced monthly JGS purchases push up long-term yields, raising corporate funding costs and household mortgage rates, thereby suppressing aggregate demand. Second, a stock effect: lower cumulative JGS holdings increase term premia and raise yields across the curve, tightening financial conditions.
BOJ JGS holdings are down -8.0% year-on-year (-¥46.4 trillion), so the stock effect could be putting upward pressure on long-term yields. Concurrently, the flow effect from an annual QT pace of ¥46.3 trillion tightens JGS supply/demand and likely contributes to higher yields, thereby helping to contain inflation.
The April 2026 halving of JGS purchases appears to be a policy choice to avoid excessive tightening while balancing the goals of BS normalization and price stability.
Per Cabinet Office CI data, the leading index for February 2026 was 113.3 and the coincident index 116.3. The leading index rose 1.3 points from 112.0 in January 2026 and improved 2.9 points from 110.4 in December 2025. The coincident index fell 1.8 points from 118.1 in January 2026 but remains above 114.6 in December 2025.
The improving leading index suggests that the BOJ’s balance sheet normalization (annual pace ¥46.3 trillion) has not caused severe deterioration in near-term economic prospects. The high level of the coincident index also indicates current economic activity remains consistent with the balance sheet contraction.
However, the lagging index rose only marginally from 112.8 to 113.1, indicating that improvements in employment and income are moderate. This suggests potential delayed effects of BS and interest-rate normalization on the labor market, warranting close monitoring.
METI’s seasonally adjusted industrial production index for February 2025 was 102.2, a large month-on-month increase of +2.3%, reversing January 2025's -1.1% decline and indicating resilience in production activity.
From March 2024 to February 2025, the production index ranged from 99.9 to 102.2 without a clear trend, suggesting that BOJ balance sheet normalization has not directly harmed manufacturing output.
However, industrial production data are only available up to February 2025 in this dataset, so direct assessment of the April 2026 JGS purchase halving on production is not possible; further data accumulation is necessary.
According to the BOJ Tankan, the Q1 2026 business conditions DI was +17 for large-manufacturing and +36 for large non-manufacturing, both improvements from the prior quarter. Large-manufacturing DI improved 4 points from +13 in Q2 2025, and large non-manufacturing improved 2 points from +34.
Future outlook DIs were +15 for large manufacturing and +28 for large non-manufacturing—slightly below current DIs but still in positive territory. This indicates firms are cautious about the outlook but do not anticipate severe deterioration.
Sentiment among medium and small firms also improved: medium manufacturing +16 and small manufacturing +7. This suggests the BOJ’s balance sheet normalization has not inflicted severe damage on sentiment across firm sizes.
Improvements in business conditions DI suggest that the annual ¥46.3 trillion pace of balance sheet reduction and interest-rate normalization have not dramatically worsened firms’ operating environment. Likely contributing factors include:
First, slowing inflation (core-core +2.4%) has eased firms’ cost pressures and improved profitability. Second, the improvement in leading indicators points to resilient domestic demand supporting business activity. Third, the BOJ’s April 2026 halving of JGS purchases may have avoided sudden tightening in financial conditions, helping to stabilize corporate financing.
Nevertheless, the fact that future outlook DIs are below current DIs indicates firms remain cautious about further tightening. The ongoing impact of balance sheet normalization on corporate sentiment requires continued observation.
The April 2026 BOJ balance sheet sits at a key policy inflection point with the start of halving JGS purchases. Maintaining an annual QT pace of ¥46.3 trillion while reducing monthly purchases to roughly ¥200 billion appears to aim to reconcile the following objectives:
First, continuing passive QT to advance monetary normalization. Year-on-year JGS holdings down -8.0% indicate steady progress in the QQE exit. Second, preserving JGS market functioning. Halving purchases should help restore price discovery and market formation of the yield curve. Third, avoiding overly rapid tightening. Retaining monthly purchases of ¥200 billion rather than reducing them to zero indicates concern about minimizing shocks to markets.
The April increase in current account balances (+¥9.7 trillion) suggests the policy shift may have had a temporary effect on short-term market liquidity. The rise in the current account/total assets ratio (69.4% → 70.8%) implies the liability-side liquidity structure is responding to policy change.
Core-core CPI at +2.4% remains above the BOJ’s 2% target but has decelerated from the +3.0% peak in November 2025. This deceleration is consistent with the BOJ’s balance sheet normalization (annual ¥46.3 trillion) and interest-rate normalization producing disinflationary effects.
A year-on-year -8.0% decline in JGS holdings could raise long-term yields via the stock effect, and the annual ¥46.3 trillion flow effect further tightens JGS supply/demand, contributing to higher yields and tamping down inflation. The April 2026 halving of purchases appears intended to avoid excessive tightening while progressing toward price stability.
All three—BOJ, FRB, ECB—are in QT as of April 2026, but differ in pace and method. BOJ’s year-on-year -9.29% is the most rapid among them, reflecting a late start followed by rapid progress. This path reflects earlier policy steps: YCC adjustment in 2023 and exit from negative rates in 2024, leading to accelerated QT from 2025.
The FRB’s cap-limited passive QT enhances predictability and helps avoid market disruption. The ECB’s hybrid approach maintains partial reinvestment while phasing down purchases. The BOJ’s April 2026 halving of purchases moves it closer to the FRB/ECB approaches of predictable, gradual normalization—indicating signs of policy convergence among the three central banks.
BOJ JGS holdings of ¥531.9 trillion face risk of larger valuation losses in a rising-rate environment. Under an IMF-style risk assessment framework, a 1 percentage point rise in long-term yields with an assumed duration of 10 years would imply about ¥53 trillion of valuation loss.
With current 10-year yields estimated around 1%, a rise to 2% would pose a significant valuation-loss risk to the BOJ balance sheet. However, the BOJ holds JGS to maturity, so valuation changes are unrealized losses, and under the BOJ Act, operations can continue even if valuation losses exceed capital.
The greater risk is not the valuation loss itself but the potential impact of large unrealized losses on market confidence in monetary policy. The April 2026 halving of JGS purchases is assessed to help mitigate this risk.
Assuming continuation of the current annual QT pace of ¥46.3 trillion, JGS holdings of ¥531.9 trillion are projected to evolve as follows:
This projection assumes a steady maturity-arrival pace; in practice, maturity arrivals will vary with the remaining maturity composition. The April 2026 halving of purchases could accelerate the annual QT pace by about ¥2.4 trillion to roughly ¥48.7 trillion.
If JGS holdings fall below ¥400 trillion around 2029, the BOJ’s presence in the JGS market would be substantially reduced and market functioning could normalize. Even then, the BOJ would still hold roughly 40% of outstanding JGS issuance, retaining significant influence.
Scenario 1: Accelerated rate hikes
If inflation re-accelerates forcing the BOJ to raise rates further, long-term yields could spike, expanding valuation losses. QT would likely need to accelerate, possibly exceeding an annual ¥60 trillion pace. Rapid declines in current account balances could strain short-term markets and raise funding costs for financial institutions.
Scenario 2: Synchronized global QT
If the FRB and ECB implement faster-than-expected QT, global liquidity could tighten sharply and push up Japanese long-term yields. The BOJ would face a trade-off between domestic financial stability and coordinated global normalization; it might be forced to re-expand purchases, stalling QT.
Scenario 3: JGS market functioning deterioration
If halving purchases reduces JGS market liquidity more than expected and impairs price discovery, yield-curve distortions could widen. The BOJ might need to re-escalate purchases or target specific maturities to restore market function.
The April 2026 BOJ balance sheet marks a new phase in the QQE exit with the halving of monthly JGS purchases. The BOJ is in a “fine-tuning” stage where it seeks to maintain an annual QT pace of ¥46.3 trillion while preserving market functioning and financial stability.
The April increase in current account balances (+¥9.7 trillion) suggests the policy shift had a temporary impact on short-term liquidity; whether this represents a sustained trend reversal requires several months of additional data.
The deceleration of inflation (core-core +2.4%), improvement in leading indicators and solid corporate sentiment indicate the current BS normalization pace is broadly consistent with the real economy. Nonetheless, valuation-loss risk in a rising-rate environment and the need for policy coordination amid global QT are key monitoring items.
Policy management in FY2026 will require a data-dependent approach: steadily implement the quarterly ¥40 billion purchase reductions while closely monitoring JGS market functioning and short-term liquidity, and flexibly adjusting if needed. As the BOJ/FRB/ECB show signs of policy convergence, Japan appears to be transitioning from a “late-start, rapid” normalization path toward a more predictable, gradual normalization trajectory.
Data sources
Passive QT: A quantitative tightening method that reduces the central bank's balance sheet by stopping reinvestment of maturing securities. Because it does not involve outright sales, its market impact is relatively moderate.
Flow effect: The short-term impact on market supply/demand and price formation from changes in the central bank's monthly purchases or sales of government securities. Changes in the QT pace are a key analytical focus.
Stock effect: The medium-to-long-term effect of the central bank's cumulative holdings on long-term yields and the term premium. Absolute holding levels and their share of total assets are key indicators.
Current account balances / Total assets ratio: An indicator of the liability-side liquidity structure of a central bank's balance sheet. It is calculated by dividing current account balances by total assets to assess the relative size of reserve balances.
Policy asset ratio: The share of non-traditional policy assets—ETFs, J-REITs, corporate bonds—within total assets. It indicates the prominence of QQE-style holdings on the BOJ's balance sheet.
Annual QT pace: The annualized balance sheet reduction pace calculated as the 12-month moving sum of month-on-month JGS changes. It quantitatively measures the progress of passive QT.
Cap-limited Passive QT: The FRB's approach of passive QT with monthly caps. Reinvestment stops occur within set monthly limits (Treasuries USD 60 billion, MBS USD 35 billion).
Core-core CPI: The consumer price index excluding fresh food and energy. It is used to gauge underlying inflation dynamics and is emphasized in central bank policy assessments.
Business conditions DI: The diffusion index from the BOJ Tankan that reflects corporate sentiment. It is calculated as the percentage of firms reporting 'favorable' minus the percentage reporting 'unfavorable' conditions.
Term premium: The extra return investors require to hold long-term bonds. Large central bank holdings tend to suppress the term premium, which can rise as QT proceeds.
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.