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 total assets stood at ¥664.4 trillion at end-May 2026, up ¥1.1 trillion month-on-month. JGS holdings were ¥533.1 trillion (month-on-month increase of ¥11.8 billion), a marginal rise, while the 12-month cumulative change shows a decrease of ¥47.6 trillion. As the QT slowdown policy implemented in April 2026 (monthly purchases halved from about ¥400 billion to about ¥200 billion) takes hold, current account balances fell ¥17.3 trillion to ¥452.1 trillion, and the current account / total assets ratio declined to 68.0%. The transformation of the liquidity structure is accelerating.
According to the BOJ's Statements of Account, JGS holdings were ¥533.1 trillion in May 2026, a month-on-month increase of ¥11.8 billion. This magnitude is almost identical to April 2026's ¥11.8 billion increase and suggests a new equilibrium point after implementation of the QT slowdown policy.
Looking at month-on-month changes over the past 13 months, a clear seasonality is apparent. Large declines occur in quarter-end months (June, September, December, March), averaging ¥14,830.4 billion (▲¥14.8304 trillion), while other months show small increases averaging ¥1,501.1 billion (¥1.5011 trillion). May 2026's increase of ¥11.8 billion is far below the 12-month average of ¥1,501.1 billion for non-quarter-end months, indicating that the QT slowdown policy is beginning to appear in the figures.
The 12-month cumulative decrease (June 2025–May 2026) in JGS holdings reached ¥47.6 trillion. This expanded by ¥1.3 trillion from April 2026's ¥46.3 trillion, so the annual QT pace remains at a high level.
This ¥47.6 trillion corresponds to 7.2% of BOJ total assets of ¥664.4 trillion. On a monthly average basis, the reduction pace is approximately ¥4.0 trillion. Considering the policy change since April 2026 (monthly purchases ≈ ¥200 billion), maturities arriving are estimated at about ¥4.2 trillion per month.
The pattern of large quarter-end declines indicates that the maturity structure of BOJ-held JGS is concentrated at quarter-ends. In the four quarter-ends (June, September, December 2025 and March 2026) total reductions amounted to ¥59,321.7 billion (about ¥59.3 trillion), which far exceeds the annual decrease of ¥47.6 trillion.
The difference (about ¥11.7 trillion) can be explained by small purchases in non-quarter-end months (monthly ≈ ¥200 billion × 9 months = about ¥1.8 trillion) and reinvestment of maturities that do not fall at quarter-ends. Under the QT slowdown policy since April 2026, the pattern of large quarter-end declines has been maintained, but non-quarter-end monthly purchases were halved from about ¥400 billion to about ¥200 billion, placing the annual QT pace on a gradually slowing trajectory.
The JGS / total assets ratio was 80.2% in May 2026, unchanged from the previous month (80.2%). Over the past 13 months it has risen 1.0 percentage point from 79.2% in May 2025, indicating that the pace of total asset contraction has exceeded the pace of JGS decline.
This structural change is explained by a marked reduction in loans outstanding. Loans fell from ¥96.8 trillion in May 2025 to ¥77.7 trillion in May 2026, a decrease of ¥19.1 trillion (▲19.7%). In particular, a large ¥13.7 trillion decline occurred in September 2025, reflecting the unwinding of various operations.
The policy asset ratio (the sum of ETF, J-REIT and corporate bond holdings) was 6.0% in May 2026: ETF 5.6%, J-REIT 0.1%, corporate bonds 0.3%.
ETF holdings were ¥37.1 trillion, down ¥0.1 trillion from ¥37.2 trillion in May 2025. Monthly data show small declines continuing since January 2026 (average ¥28.1 billion/month decrease), interpreted as valuation losses from market price movements.
Corporate bond holdings have declined to ¥1.9 trillion (0.3%), down 0.3 percentage points from 0.6% in May 2025. The phased reduction of COVID-related corporate financing special operations is progressing.
Over the past 13 months total assets contracted from ¥733.6 trillion to ¥664.4 trillion, a reduction of ¥69.2 trillion (▲9.4%). The composition of this contraction was JGS ▲¥47.6 trillion (68.8%), loans ▲¥19.1 trillion (27.6%), and other assets ▲¥2.5 trillion (3.6%).
In the QT phase, passive reduction of JGS holdings (stopping reinvestment of maturities) is the main driver of contraction, but active reduction of loans has proceeded in parallel. These two simultaneous contraction mechanisms have reduced the BOJ balance sheet by about ¥75 trillion (▲10.1%) from the Q1 2021 peak (about ¥740 trillion).
Current account balances were ¥452.1 trillion at end-May 2026, a large month-on-month decline of ¥17.3 trillion. The current account / total assets ratio fell to 68.0%, down 2.8 percentage points from 70.8% in the previous month.
Over the past 13 months the ratio declined 4.6 percentage points from 72.6% in May 2025. Monthly swings have been sizable (▲0.2 to ▲2.8 percentage points), with large reductions in September 2025 (▲¥21.6 trillion), December 2025 (▲¥16.1 trillion), February 2026 (▲¥7.0 trillion) and May 2026 (▲¥17.3 trillion).
This pattern reflects a combination of seasonal demand for reserves by financial institutions and passive liquidity absorption associated with BOJ asset contraction. The secular decline in the current account ratio suggests the financial system's liquidity structure is shifting from the QQE period's "excess liquidity" toward a more "appropriate liquidity" environment.
Banknotes in circulation were ¥115.2 trillion in May 2026. Due to data constraints the month-on-month change could not be calculated, but the relative stability of banknotes on the liability side contrasts with the large fluctuations in current account balances.
Banknotes in circulation reflect cash demand in the economy, and their stable path suggests nominal transaction volumes in the real economy have not changed materially.
Monetary base figures (banknotes + current account balances) are not provided in the BOJ supplementary statistics, preventing a quantitative assessment. However, given the sustained large decline in current account balances, the monetary base is likely contracting on trend.
As of May 2026, total assets were: BOJ ¥664.4 trillion, FRB USD 6.70 trillion, ECB EUR 6.19 trillion. Because currencies differ, comparisons are normalized by month-on-month percentage changes.
BOJ month-on-month change rate was +1.7% (month-on-month increase of ¥1,109.7 billion / previous total assets ¥663.3 trillion). The FRB was unchanged at USD 6.70 trillion (0.0% change), and the ECB declined to EUR 6.19 trillion from EUR 6.22 trillion (▲0.5%).
BOJ year-on-year change was ▲9.44% (¥733.6 trillion → ¥664.4 trillion), a slight acceleration in the contraction pace from the previous month's ▲9.29%.
Year-on-year data for the FRB and ECB are not provided for direct comparison. However, over the five months January–May 2026, BOJ declined ▲2.7% (¥682.9 trillion → ¥664.4 trillion), the FRB expanded +1.7% (USD 6.59 trillion → USD 6.70 trillion), and the ECB declined ▲1.6% (EUR 6.29 trillion → EUR 6.19 trillion).
This five-month comparison indicates BOJ's contraction pace (monthly average ▲0.54%) exceeds the ECB's (monthly average ▲0.32%), while the FRB is in an expansionary phase.
Data for January–May 2026 clearly show the three central banks' balance sheet policies are asynchronous: BOJ and ECB are in QT phases, while the FRB continues modest expansion.
Two factors help explain BOJ's faster QT pace (monthly average ▲0.54%) relative to the ECB (▲0.32%). First, JGS holdings account for 80.2% of BOJ total assets, creating a mechanical passive reduction as maturities arrive. Second, active reduction in loans (▲19.7% over 13 months) has proceeded in parallel.
The ECB's more gradual QT pace likely reflects cautious normalization in the euro area. The FRB's expansionary stance indicates a different U.S. policy posture relative to BOJ and ECB.
The BOJ's month-on-month pattern in JGS holdings—large quarter-end declines and small increases in other months—typifies passive QT (stopping reinvestment of maturing securities). The halving of monthly purchases since April 2026 (about ¥400 billion → about ¥200 billion) is an adjustment within a passive QT framework.
Data do not allow judgment on the detailed methods used by the FRB and ECB, but BOJ's consistent use of passive QT can be interpreted as an effort to minimize market disruption. Active sales can abruptly change market supply-demand balances and are therefore avoided in favor of natural contraction via maturities.
According to Ministry of Internal Affairs and Communications CPI data, the overall CPI year-on-year for April 2026 was +1.4%, core CPI (excluding fresh food) +1.4%, and core-core CPI (excluding fresh food and energy) +1.9%.
Since May 2025, headline CPI y/y fell from +3.5% (May 2025) to +1.4% (April 2026), a drop of 2.1 percentage points. Core fell from +3.7% to +1.4% (▲2.3 points), and core-core fell from +3.3% to +1.9% (▲1.4 points). Price pressures have clearly decelerated.
BOJ JGS holdings fell ¥47.6 trillion over the same period, so balance sheet contraction and price deceleration are proceeding concurrently. Theoretically, QT works through long-term rate increases → financial tightening → downward pressure on prices; the April 2026 QT slowdown policy can be viewed as supporting return toward the 2% price target.
Core-core y/y at +1.9% is slightly below the BOJ's 2% price stability target, and the current QT slowdown pace (monthly purchases ≈ ¥200 billion) appears broadly consistent with achieving the price target.
Three channels by which BOJ balance sheet contraction may affect prices are considered:
First, JGS holdings decline → long-term yields rise → higher corporate funding costs → reduced investment → lower aggregate demand → downward pressure on prices. Quantitative evaluation is not possible here due to lack of long-term yield data in the provided dataset.
Second, declines in current account balances → lower excess reserves for banks → reduced lending capacity → constrained credit creation → lower money supply → downward pressure on prices. Current account balances have fallen ¥80.2 trillion (▲15.1%) over the past 13 months, suggesting this channel is active.
Third, balance sheet contraction itself signals policy tightening and reduces inflation expectations. The downward CPI trend is consistent with this expectations channel operating.
According to Cabinet Office CI data (most recent: March 2026), the leading index was 114.0, coincident index 116.4, and lagging index 112.4.
Since January 2025 the leading index has risen from 107.7 to 114.0 (+6.3 points), the coincident index from 116.2 to 116.4 (+0.2 points), and the lagging index from 112.0 to 112.4 (+0.4 points). The economy is on a gentle expansion path.
Over the same period BOJ total assets contracted from ¥733.6 trillion (May 2025) to ¥662.1 trillion (March 2026), a reduction of ¥71.5 trillion (▲9.7%). Balance sheet contraction and economic expansion have proceeded simultaneously, suggesting QT has not materially impeded economic growth.
The rise in the leading index (+6.3 points) indicates potential for sustained expansion, and the current QT slowdown pace appears consistent with the real economy.
METI's index of industrial production (seasonally adjusted; most recent: February 2025) was 102.2, a month-on-month rise of +2.3%.
From March 2024 to February 2025 the index moved from 101.4 to 102.2 (+0.8 points), indicating production activity has been broadly flat. Monthly volatility is large (▲2.0% to +3.5%), but the trend is stable.
Although direct comparison with BOJ total assets since March 2024 is constrained by data limitations, considering the contraction pace since May 2025 (▲9.4%), balance sheet shrinkage does not appear to have significantly suppressed production activity.
The stable path of industrial production suggests QT has not inflicted severe adverse effects on manufacturing output.
The expanding leading index and stable industrial production imply that BOJ's annual QT pace of ¥47.6 trillion (▲7.2% of total assets) is compatible with continued real economic growth.
The April 2026 QT slowdown (halving monthly purchases) can be assessed as supporting a return to the price target while allowing sustainable economic growth. The leading index's upward trend suggests ongoing expansion, making the current QT slowdown pace appropriate.
BOJ Tankan (Q1 2026) shows the large-manufacturing business conditions DI at 17 (future 15), large non-manufacturing 36 (future 28), medium-sized manufacturing 16, and small manufacturing 7.
Since Q2 2025, large-manufacturing DI improved from 13 to 17 (+4 points), large non-manufacturing from 34 to 36 (+2 points), medium manufacturing from 10 to 16 (+6 points), and small manufacturing from 1 to 7 (+6 points). Corporate sentiment has improved across company sizes and sectors.
BOJ total assets contracted from ¥733.6 trillion (Q2 2025) to ¥682.9 trillion (Q1 2026), a reduction of ¥50.7 trillion (▲6.9%). Balance sheet contraction and improving corporate sentiment have proceeded together, indicating QT has not undermined corporate confidence.
Possible explanations for improved corporate sentiment include:
First, normalization of monetary policy through QT may have strengthened confidence in sustainable growth. Extended QE can signal structural vulnerability, whereas QT suggests recovery of autonomous growth capacity.
Second, decelerating inflation (CPI headline y/y +3.5% → +1.4%) may have improved firms' real purchasing power and eased cost pressures, enhancing profitability.
Third, the rising leading index has likely improved sales and order outlooks. The +6.3 point increase in the leading index suggests future demand expansion.
The forward-looking DI for large-manufacturing (15) is 2 points below the current assessment (17), and the forward-looking DI for large non-manufacturing (28) is 8 points below the current assessment (36). Firms remain cautious about the outlook.
This caution may reflect concerns about tightening financial conditions accompanying continued QT. The April 2026 QT slowdown is expected to mitigate some of this forward-looking uncertainty.
Call rate data are not provided in the BOJ supplementary statistics, preventing a quantitative assessment of the relationship between QT pace (month-on-month JGS changes) and the call rate. However, the large decline in current account balances (▲¥80.2 trillion over 13 months) is likely to tighten short-term financial market liquidity.
The decline in the current account / total assets ratio (72.6% → 68.0%) indicates diminishing excess reserves for financial institutions and may exert upward pressure on the call rate. The April 2026 QT slowdown should have a mitigating effect on this upward pressure.
Monetary base (MB) pathway cannot be quantitatively assessed due to lack of data.
The BOJ's annual JGS holdings reduction (▲¥47.6 trillion) and the CPI y/y decline (headline +3.5% → +1.4%, core +3.7% → +1.4%) show clear simultaneity.
Theoretically, JGS holdings decline → long-term yields rise → financial tightening → downward pressure on prices. Core-core y/y at +1.9% is slightly below the 2% target, and the current QT slowdown pace appears consistent with the price objective.
April 2026's QT slowdown can be interpreted as a precautionary measure against the risk that inflation falls persistently below target. Halving monthly purchases (about ¥400 billion → about ¥200 billion) supports the return toward the price target.
BOJ's year-on-year contraction of ▲9.44% substantially exceeds the ECB's five-month contraction rate (monthly average ▲0.32%, annualized ▲3.8%). The FRB remains expansionary; hence, the three central banks' balance sheet policies are asynchronous.
BOJ's relatively aggressive QT pace can be explained by: (1) a lower inflation rate in Japan (CPI headline +1.4%) compared with the U.S. and Europe, leaving more room for tightening; (2) a historically high BOJ balance-sheet-to-GDP ratio necessitating normalization; and (3) a high JGS share (80.2%) that mechanically accelerates passive reduction via maturities.
April 2026's QT slowdown indicates BOJ is beginning to place greater emphasis on alignment with the price target. Depending on future inflation developments, further QT deceleration (increasing monthly purchases) may become an option.
BOJ holds ¥533.1 trillion of JGS, exposing it to valuation loss risk in a rising-rate environment. Long-term yield data are not provided, so quantitative valuation loss estimates are not possible here, but the theoretical mechanism is as follows.
If long-term yields rise 1 percentage point, a portfolio with duration of 10 years would suffer roughly a 10% valuation loss. Applied to BOJ JGS holdings of ¥533.1 trillion, this corresponds to approximately ¥53.3 trillion in valuation losses.
However, BOJ holds JGS to maturity, so valuation losses are not realized if securities are held to maturity; principal is repaid at face value. Valuation loss risk may manifest as a market perception risk to BOJ's financial soundness.
Assuming the current QT pace (annual ▲¥47.6 trillion) continues, BOJ JGS holdings would follow:
Considering the April 2026 QT slowdown (monthly purchases halved), annual QT pace is estimated to slow to about ¥24 trillion (monthly purchases ¥200 billion × 12 = ¥2.4 trillion; maturities about ¥50 trillion; net ▲¥24 trillion). Under this scenario the path would be:
The QT slowdown would therefore leave about ¥94 trillion more JGS on BOJ's balance sheet by May 2030 compared with the faster annual pace scenario.
Current account balances have fallen ¥80.2 trillion (▲15.1%) over the past 13 months and the current account / total assets ratio has dropped to 68.0%. If this trend continues, the following risk scenarios are conceivable.
Scenario 1: Emergence of reserve shortfalls
Further declines in current account balances could cause financial institutions' reserve positions to fall below required levels. This would trigger sharp spikes in the call rate and liquidity stress in short-term markets, with potential spillovers to the real economy.
Scenario 2: Transition away from excess-reserve dependence
Declining current accounts could change banks' lending behavior, shifting from reliance on excess reserves toward increased lending to the real economy. This could stimulate credit creation, increase money supply and exert upward pressure on prices.
Scenario 3: Acceleration of QT slowdown
Heightened liquidity stress risks could prompt BOJ to accelerate its QT slowdown (increasing monthly purchases). This would materially slow the balance sheet contraction and prolong the normalization process.
January–May 2026 data show BOJ and ECB in QT while the FRB is expansionary. If the FRB were to shift into QT, synchronized global liquidity reduction could occur.
In a synchronized global QT the following transmission channels are possible: (1) worldwide long-term yield increases → higher capital costs → reduced global investment → world economic slowdown; (2) dollar appreciation (and yen appreciation) → deterioration in Japan's export competitiveness → worsening trade balance; (3) global equity declines → valuation losses on BOJ-held ETFs → concerns over financial soundness.
At present the FRB remains expansionary, so the global QT synchronization risk has not materialized. Still, should U.S. inflation dynamics change, a FRB shift to QT could occur and merits monitoring.
The April 2026 QT slowdown appears an appropriate judgment prioritizing alignment with the price target and sustainable real growth. The CPI downward trend (headline +1.4%, core-core +1.9%), expansionary leading index (+6.3 points), and improving corporate sentiment (large-manufacturing DI +4 points) indicate the current QT slowdown pace is consistent with economic conditions.
Key focus points going forward are: (1) if inflation persistently remains below 2%, further QT slowdown (increasing monthly purchases) may be required; (2) if the decline in current account balances continues, measures to address liquidity risk will be needed; (3) if the FRB moves to QT, preparations for global QT synchronization risk are necessary.
The BOJ has indicated a policy of reducing monthly purchase amounts by ¥40 billion each quarter through fiscal 2026. This gradual tapering is a cautious approach to normalize the balance sheet while minimizing market disruption. Flexible policy implementation will be required, with close monitoring of prices, activity and financial markets.
Sources
QT (Quantitative Tightening): Abbreviation for Quantitative Tightening. A central bank policy to reduce its balance sheet, implemented by stopping reinvestment of maturing government bonds (passive QT) or by selling held assets (active QT).
Passive QT: A balance sheet reduction method that lets holdings decline naturally by not reinvesting maturing government bonds. It minimizes market impact.
Current account / total assets ratio: The share of current account balances (当座預金) on the liabilities side of the central bank balance sheet, indicating the liquidity structure of the financial system.
Policy assets: BOJ-held assets for policy purposes, the sum of ETFs, J-REITs and corporate bonds—non-traditional assets accumulated during QE.
Flow effect: The short-term impact of a central bank's monthly asset purchase/sale volumes on market supply-demand and price formation. Changes in the QT pace are important.
Stock effect: The long-term effect whereby cumulative central bank holdings suppress long-term yields and term premia. Track trend changes in asset composition ratios.
Monetary base: The sum of banknotes in circulation (発行銀行券) and the central bank's current account balances (当座預金). It represents currency directly supplied by the central bank.
Business conditions DI: An index of corporate sentiment from the BOJ Tankan. Calculated as the percentage of firms reporting 'positive' minus the percentage reporting 'negative' conditions.
Core CPI: Consumer Price Index excluding fresh food, used to capture underlying price trends by removing weather-driven volatility.
Core-core CPI: Consumer Price Index excluding fresh food and energy, providing the most underlying measure of price trends by removing energy price swings.
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.