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.
According to the Bank of Japan Statements of Account (営業毎旬報告), BOJ total assets in June 2026 stood at ¥639.6 trillion, a month-on-month decrease of ¥24.8 trillion. This quarter-end followed the April start of the QT deceleration policy (reducing monthly JGS purchases from about ¥400 billion to about ¥200 billion). JGS holdings declined sharply to ¥518.3 trillion (MoM -¥14.8 trillion), driving the 12-month cumulative annual shrinkage pace to ¥49.2 trillion. Current account balances totaled ¥440.4 trillion (68.9% of total assets). BOJ total assets were down year-on-year -10.86%, maintaining a faster normalization pace than the FRB (USD 6.74 trillion) and the ECB (EUR 6.12 trillion). The question now is whether QT deceleration and rate normalization can be reconciled.
BOJ Statements of Account show JGS holdings at ¥518.3 trillion in June 2026, a MoM decline of ¥14.8 trillion. This is the second-largest monthly decline after March 2026 (-¥15.8 trillion) and reflects a typical passive-QT pattern with concentration of maturities at quarter-ends. By contrast, April and May posted modest MoM increases of ¥1.1 trillion and ¥1.2 trillion respectively, indicating that the QT deceleration (monthly purchases halved from April) has become apparent in non-quarter-end months.
The 12-month cumulative reduction in JGS reached ¥49.2 trillion, up from ¥47.6 trillion in the prior month (May 2026), indicating an acceleration in the annual shrinkage pace. From June 2025 to June 2026, quarter-end months (Sep 2025, Dec 2025, Mar 2026, Jun 2026) saw large declines of ¥14.9T, ¥15.4T, ¥15.8T, and ¥14.8T respectively, while non-quarter-end months generally recorded modest increases of about ¥1–2T. The ¥49.2T annual shrinkage equals approximately 8.7% of JGS holdings as of June 2025 (¥567.5T), and thus remains a substantial passive-QT pace.
The QT deceleration policy launched in April 2026 (halving monthly JGS purchases from about ¥400 billion to about ¥200 billion, with a further quarterly reduction of ¥40 billion) shows up in the non-quarter-end MoM JGS flows. April and May 2026 MoM JGS changes (+¥1.1T and +¥1.2T) are at the same level or slightly below comparable periods in 2025 (e.g., Jul–Aug 2025: +¥1.4T, +¥2.8T; Oct–Nov 2025: +¥1.4T, +¥1.6T; Jan–Feb 2026: +¥1.2T, +¥1.1T). This suggests that the halving of purchases has reduced the reinvestment ratio of maturing JGS and suppressed the net increase of JGS holdings even in non-quarter-end months.
Quarter-end declines remain large—June 2026 fell ¥14.8T, slightly smaller than March 2026's ¥15.8T but comparable to Sep 2025's ¥14.9T and Dec 2025's ¥15.4T. This indicates that while QT deceleration mainly affects reinvestment in non-quarter-end months, the mechanical decline from concentrated quarter-end maturities has not materially changed. The persistence of the ¥49.2T annual shrinkage pace implies that substantial balance sheet normalization continues under QT deceleration.
BOJ Statements of Account show asset composition in June 2026 of JGS 81.0%, ETF 5.8%, and loans outstanding 10.6%. The JGS ratio rose 0.8 percentage points from May 2026 (80.2%) and 1.9 percentage points from June 2025 (79.1%). This structural shift reflects total asset contraction (¥639.6T, year-on-year -10.9%) outpacing the decline in JGS holdings (¥518.3T, year-on-year -8.7%).
Loans outstanding declined to ¥68.0 trillion, a MoM reduction of ¥9.7 trillion. This is a large drop following March 2026's ¥15.8T decrease (note: the report contains a presumed misprint regarding March 2026, where 77.7T→77.7T appears; the likely intended series is 83.5T→77.7T, i.e., a ¥5.8T decline). The recent reduction reflects maturities of various operations and restrained new lending. The loans outstanding ratio fell to 10.6% from 11.7% in the prior month, a 1.1 percentage point decline, and is down 2.6 percentage points from June 2025 (13.2%). Year-on-year, loans outstanding fell -28.1% (¥94.6T in June 2025 → ¥68.0T in June 2026), far exceeding the JGS decline of -8.7%, indicating that contraction of lending operations is proceeding faster than JGS reductions in the balance sheet normalization process.
ETF holdings were ¥37.0 trillion (MoM -¥0.03T), J-REIT holdings ¥0.7 trillion, and corporate bonds ¥1.6 trillion, bringing total policy assets (ETF + J-REIT + corporate bonds) to ¥39.3 trillion. The policy asset ratio was 6.1%, up 0.1 percentage point from 6.0% the prior month, driven by the denominator effect from shrinking total assets. ETF holdings have fallen incrementally since January 2026 (Jan -¥5.3B, Feb -¥25.6B, Mar -¥33.8B, Apr -¥27.9B, May -¥23.5B, Jun -¥29.7B), totalling -¥145.8B. This change is likely technical (e.g., suspension of dividend reinvestment or valuation effects) rather than market disposals.
The JGS ratio of 81.0% is approaching peak levels seen since the start of QQE. The rise from 79.1% in June 2025 to 81.0% reflects the rapid contraction of loans outstanding (year-on-year -28.1%) and total assets (year-on-year -10.9%) outpacing the JGS decline (year-on-year -8.7%). This structural shift suggests a return to a more JGS-centric BOJ balance sheet and marks a transition from the diversified asset purchases of the QQE era toward a more traditional central bank balance sheet.
BOJ Statements of Account report current account balances at ¥440.4 trillion in June 2026, a MoM decline of ¥11.7 trillion. The ratio of current account balances to total assets rose to 68.9% from 68.0% in the prior month, a 0.9 percentage point increase driven by total assets contracting faster (MoM -¥24.8T, -3.7%) than current account balances (MoM -¥11.7T, -2.6%).
Year-on-year, current account balances fell by ¥88.7 trillion (from ¥529.1T in June 2025 to ¥440.4T in June 2026), a -16.8% decline—outpacing both JGS reduction (-¥49.2T, -8.7%) and total assets reduction (-¥77.9T, -10.9%). This suggests that, in addition to QT-driven JGS reductions, the large contraction in loans outstanding (¥-26.6T, -28.1% YoY) has accelerated outflows from current account balances.
Monthly flows since July 2025 show current account balances falling substantially at quarter-ends (Sep 2025 -¥21.6T, Dec 2025 -¥16.1T, Mar 2026 -¥1.4T, Jun 2026 -¥11.7T), and generally declining in non-quarter-end months as well (e.g., Jul 2025 -¥4.7T, Aug -¥0.8T, Oct -¥4.4T, Nov -¥10.7T, Jan 2026 -¥2.8T, Feb -¥7.0T, May -¥17.3T). The lone exception is April 2026, which rose by ¥9.7T—likely a temporary liquidity demand at the start of the fiscal year. The trend decline in current account balances indicates a reduction in excess reserves in the banking system and a tightening of the short-term liquidity environment.
Banknotes in circulation were ¥115.0 trillion in June 2026. The provided data do not include MoM or YoY comparisons, so temporal quantification is not possible here. Banknotes in circulation reflect cash demand in the economy and accounted for 18.0% of total assets (¥639.6T). Current account balances (¥440.4T) plus banknotes in circulation (¥115.0T) constitute the major components of the monetary base, but the Statements of Account do not provide an explicit monetary base figure, so we refrain from further quantification.
Combined, the current account ratio (68.9%) and banknote ratio (18.0%) sum to 86.9%, confirming that the liabilities side of the BOJ balance sheet is overwhelmingly composed of liquidity-supplying items (current accounts + banknotes). This ratio indicates that even as QT proceeds, the BOJ remains the principal liquidity supplier to the financial system.
Based on data from the Federal Reserve Bank of St. Louis (FRED) and the European Central Bank Statistical Data Warehouse, total central bank assets in June 2026 were: BOJ ¥639.6T (year-on-year -10.86%), FRB USD 6.74 trillion, and ECB EUR 6.12 trillion. BOJ's year-on-year -10.86% represents an acceleration in shrinkage from January 2026 (-8.26%), February -8.47%, March -9.27%, April -9.29%, and May -9.44%, confirming BOJ is normalizing its balance sheet faster than the other two central banks.
Provided data lack YoY rates and monthly changes for the FRB and ECB, limiting quantitative pace comparisons. Over six months, FRB total assets increased from USD 6.59T in January 2026 to USD 6.74T in June (+USD 0.15T, +2.3%), while ECB assets decreased from EUR 6.29T in January to EUR 6.12T in June (-EUR 0.17T, -2.7%). Over the same six months BOJ assets fell from ¥682.9T to ¥639.6T (¥-43.3T, -6.3%), showing a contrasting pattern: FRB slight increase, ECB modest decline, BOJ substantial decline.
BOJ's balance sheet contraction exhibits a passive-QT pattern: large JGS declines in quarter-end months (¥14–16T) and modest increases in non-quarter-end months (¥1–2T). This method reduces holdings by partially stopping reinvestment of maturities. The April 2026 QT deceleration increased reinvestment in non-quarter-end months, but the quarter-end reduction mechanism remains.
Detailed monthly flows and reinvestment policies for the FRB and ECB are not provided here, limiting direct comparison. However, the FRB's six-month increase (+2.3%) suggests a pause or substantial increase in reinvestment, while the ECB's six-month decline (-2.7%) implies limited QT continuation. BOJ's six-month -6.3% indicates significant normalization despite the QT deceleration.
When comparing absolute asset sizes across central banks, currency units (JPY / USD / EUR) and economic scale (GDP) must be considered. The source data do not include GDP figures, so asset-to-GDP comparisons are not possible. Rough conversions (¥639.6T ≈ USD 4.3T at 1 USD = ¥150; ECB EUR 6.12T ≈ USD 6.7T at 1 EUR = 1.10 USD) suggest FRB and ECB assets remain larger than BOJ in USD terms.
Nevertheless, YoY change rates (BOJ -10.86%) serve as a normalized indicator beyond currency and scale differences, and they clearly show BOJ is the most rapid in balance sheet normalization. This likely reflects Japan's price environment (CPI headline YoY +1.5%, core-core +1.8%) being relatively stable compared with the West and that Japan is in an earlier stage of policy normalization.
According to the Statistics Bureau, the CPI headline index was 113.5 in May 2026 (YoY +1.5%), core (ex-fresh food) YoY +1.4%, and core-core (ex-fresh food & energy) YoY +1.8%. Headline CPI peaked at +2.1% in Dec 2025 then eased to the low-1% range (Jan +1.5%, Feb +1.3%, Mar +1.5%, Apr +1.4%, May +1.5%). Core-core YoY fell from +2.9% in Dec 2025 to +1.8% in May 2026, indicating a slowdown in underlying price pressures.
The BOJ's annual balance sheet shrinkage pace of ¥49.2T (12-month cumulative JGS change) is consistent with stable CPI. Large asset purchases during QQE aimed to raise expected inflation and escape deflation via an expanded monetary base. By 2026, CPI is stable in the low-1% range—below the 2% target but showing sustained price increases—making balance sheet normalization a rational rollback of overly accommodative policy with limited immediate downside inflation risk.
The QT deceleration started in April 2026 (halving monthly JGS purchases) appears to reflect concern for maintaining alignment with the price stability objective. With headline CPI falling from +2.1% in Dec 2025 to the low-1% range, overly rapid balance sheet shrinkage could exert additional downward pressure on prices. The policy of preserving net purchases in non-quarter-end months while accepting natural declines at quarter-ends is an intermediate approach that attempts to balance price stability and liquidity provision.
However, maintaining an annual shrinkage pace of ¥49.2T still implies substantial normalization under QT deceleration. Whether this pace remains compatible with sustained CPI stability (headline YoY +1.5%, core-core YoY +1.8%) will determine the sustainability of current balance sheet policy. A marked downside surprise in CPI could prompt further deceleration or even temporary suspension of QT.
Cabinet Office data show the leading CI was 116.1 and coincident CI 118.1 in April 2026. The leading CI rose 3.6 points from January 2026 (112.5), and the coincident CI rose 0.2 points from January 2026 (117.9). Since the coincident CI bottomed at 113.9 in Aug 2025, a gradual recovery is evident and the assessment of the economy's baseline is that it is "showing improvement."
BOJ loans outstanding were ¥68.0T in June 2026 (MoM -¥9.7T; YoY -¥26.6T, -28.1%), reflecting balances of various operations (growth support, disaster-relief support for financial institutions, etc.). The rapid contraction in loans outstanding signals normalization of BOJ liquidity provision. The simultaneous improvement in CI and contraction in loans suggests private financing conditions are improving and reliance on BOJ operations is declining.
The main transmission channels are: (i) reduction in current account balances → decline in banks' excess reserves → change in lending behavior; (ii) reduction in JGS holdings → rise in long-term yields → higher corporate funding costs; (iii) tighter liquidity environment → rise in short-term money market rates.
As of June 2026, despite a large YoY fall in current account balances (-16.8%), the improving CI suggests negative spillovers to the real economy are limited. Likely reasons: (i) banks still hold ample excess reserves (¥440.4T), so lending constraints have not materialized; (ii) long-term yield rises have been moderate and corporate funding conditions have not materially deteriorated; (iii) the recovery trend supports private demand. Nonetheless, the rapid YoY -28.1% drop in loans outstanding could affect future liquidity conditions and warrants monitoring. While the leading CI at 116.1 in April 2026 reduces short-term downside risk, the medium-term impact of continued balance sheet shrinkage on the real economy remains uncertain.
BOJ Tankan shows Q1 2026 "current" business conditions DI as: large-manufacturers +17, large nonmanufacturers +36, medium-manufacturers +16, small-manufacturers +7. Large-manufacturers DI improved 4 points from +13 in Q2 2025; large nonmanufacturers improved 2 points from +34. Medium-manufacturers improved 6 points from +10; small-manufacturers improved 6 points from +1. Improvement in business sentiment is broad-based across firm sizes.
Outlook DIs (as of Q1 2026 survey) are slightly lower than current DIs—large-manufacturers +15, large nonmanufacturers +28—but remain positive, indicating firms confirm short-term improvements while retaining a cautious forward view.
Despite the BOJ's ¥49.2T annual shrinkage pace and a YoY -16.8% contraction in current account balances, improvement in business DIs suggests QT has not directly depressed corporate sentiment. Possible reasons include: (i) banks continue to maintain active lending stances and corporate funding conditions remain favorable; (ii) the recovery trend is supporting corporate earnings and robust demand; (iii) the QT deceleration has calmed market concerns and prevented a sudden tightening of financial conditions.
The sustained high large nonmanufacturers DI (+36) reflects firm domestic demand. The lower large-manufacturers DI (+17) relative to nonmanufacturers could reflect external demand uncertainty and exchange rate pressures (exchange rate data are not in the provided dataset but are generally relevant). The relatively low small-manufacturers DI (+7) suggests smaller firms are more vulnerable to changes in financial conditions.
Maintained corporate sentiment under QT is an important indicator that normalization is not imposing excessive burdens on the real economy. However, further QT or interest-rate normalization could still affect corporate funding costs and lending terms, so continued monitoring of DI trends is necessary.
Consistency between BOJ balance sheet policy and monetary policy centers on whether QT deceleration (April 2026) can be reconciled with rate normalization. The Statements of Account do not include an explicit call rate series, so quantitative linkage to policy rate is not possible here. Nonetheless, balance sheet shrinkage (¥49.2T annual pace) and falling current account balances (YoY -16.8%) could tighten short-term liquidity and limit room for policy-rate hikes.
QT deceleration is designed to ease that constraint: maintaining JGS purchases in non-quarter-end months stabilizes short-term liquidity provision while allowing natural declines from quarter-end maturities to continue balance sheet normalization. This "intermediate approach" helps avoid the "double tightening" risk of raising policy rates while aggressively shrinking the balance sheet and mitigates abrupt financial tightening.
Headline CPI YoY +1.5% and core-core YoY +1.8% are below but close to the BOJ's 2% target and indicate sustained price increases. The ¥49.2T annual balance sheet shrinkage reverses QQE-era base expansion and is consistent with normalization under stable prices.
However, the decline in headline CPI from +2.1% in Dec 2025 to +1.5% in May 2026 suggests waning inflation momentum. Continued balance sheet shrinkage could exert downward pressure on prices. The QT deceleration is a precautionary response to that risk, yet further deceleration or temporary pause may be required if CPI weakens further.
Divergent balance sheet trajectories—BOJ YoY -10.86%, FRB six-month +2.3%, ECB six-month -2.7%—reflect different policy stances and economic conditions. BOJ's rapid normalization pace is rooted in relatively stable domestic price dynamics and an earlier stage of policy normalization. FRB's increase likely reflects caution amid US uncertainty, while ECB's modest decline points to limited QT amid euro-area growth concerns.
Differences in policy asset compositions are also notable. BOJ holds ETFs ¥37.0T (5.8% of total assets) and J-REITs ¥0.7T, representing direct intervention in equity and real estate markets—distinct from the FRB and ECB. These legacy holdings from QQE mean that ETF and J-REIT disposal policies will be important exit considerations. ETF declines since January 2026 are technical and not indicative of active disposals to date.
BOJ JGS holdings of ¥518.3T are exposed to valuation-loss risk if interest rates rise. Market value of bonds moves inversely to yields, so higher long-term yields would reduce the market value of holdings. The Statements of Account do not include 10-year JGB yields, so quantitative valuation-loss estimates are not possible here, but rising yields associated with policy normalization could affect BOJ balance sheet health.
BIS frameworks note that central bank valuation losses do not immediately threaten financial stability but may produce indirect risks: (i) reduced market confidence in central bank finances; (ii) lower remittances to the government affecting fiscal accounts; (iii) questions about central bank independence. BOJ's high JGS ratio (81.0%) amplifies valuation-loss exposure in a rate-rise scenario.
Assuming the current QT pace (¥49.2T annual) continues, JGS holdings of ¥518.3T would be roughly ¥469T in one year (June 2027), ¥420T in two years (June 2028), and ¥371T in three years (June 2029). This projection relies on assumptions: (i) quarter-end maturity concentration remains unchanged; (ii) reinvestment behavior in non-quarter-end months remains unchanged; (iii) no further adjustments to the QT deceleration policy.
In practice, maturity profiles evolve, and the April 2026 QT deceleration is recent—future policy could see further deceleration or temporary pauses depending on price and growth developments. Reducing JGS holdings below ¥400T (note: pre-QQE JGS holdings in Mar 2013 were about ¥90T) would take roughly a decade at the current pace, but this long-term projection is highly uncertain.
Risk scenario 1: accelerated rate hikes
If inflation reaccelerates and BOJ raises policy rates rapidly, long-term yields would rise, expanding valuation losses on holdings. Interest expense on current account balances would also increase, potentially weakening BOJ earnings. Under this scenario, accelerating QT could over-tighten financial conditions and heighten recessionary risks.
Risk scenario 2: synchronized global QT
If the FRB and ECB both accelerate QT, global liquidity contraction could raise market volatility, depress risk assets, and trigger capital outflows from emerging markets. Domestic spillovers could hit Japan even if BOJ continues QT. Available data (Jan–Jun 2026: FRB slight increase, ECB slight decline) do not show synchronized global QT yet, but policy shifts abroad warrant vigilance.
Risk scenario 3: price downside amid continued QT
If headline CPI falls below +1%, the justification for QT weakens. Under such conditions, BOJ might need to pause QT or resume asset purchases; reversing normalization could undermine policy credibility if not communicated clearly.
As of June 2026, the BOJ balance sheet shows continued normalization under QT deceleration: annual shrinkage ¥49.2T, total assets ¥639.6T, JGS ratio 81.0%, current account ratio 68.9%. Stable CPI, improving CI, and positive corporate sentiment suggest normalization has not unduly burdened the real economy.
Key monitoring points going forward are: (i) verifying the effect of QT deceleration on JGS market functioning; (ii) the feasibility of combining QT deceleration with interest-rate normalization; (iii) continued stability of prices and activity (CPI and CI); (iv) global financial conditions (FRB/ECB policy shifts); (v) policy for ETF and J-REIT disposals.
The sustainability of the BOJ's intermediate approach—combining QT deceleration with eventual rate normalization—depends on stable developments across these factors. As of June 2026, normalization appears to be progressing broadly as intended, but the policy path will require ongoing, high-quality judgment.
Passive QT: A quantitative tightening method in which maturities are not fully reinvested, allowing the central bank balance sheet to shrink naturally; contrasted with active QT involving market sales of assets.
Flow effect: The short-term impact on market supply-demand and price formation from monthly asset purchases or sales by a central bank, contrasted with the stock effect of accumulated holdings.
Stock effect: The medium-to-long-term impact of a central bank's accumulated asset holdings on long-term interest rates and term premia, contrasted with flow effects from monthly transactions.
Current account ratio: The ratio of current account balances (当座預金; banks' deposits at the central bank) to total central bank assets; an indicator of the financial system's liquidity structure.
Policy assets: Non-traditional assets held by a central bank for policy purposes. For the BOJ, these include ETFs, J-REITs, and corporate bonds—legacies of QQE's "qualitative easing."
Excess reserves: Bank deposits at the central bank exceeding statutory reserve requirements. Expanded significantly during QQE and tending to shrink during QT.
Monetary base: The monetary aggregate directly supplied by the central bank: the sum of banknotes in circulation and banks' current account balances at the central bank.
QT deceleration policy: Policy started by the BOJ in April 2026 to halve monthly JGS purchases from about ¥400 billion to about ¥200 billion, with an additional quarterly reduction of ¥40 billion to slow the pace of balance sheet normalization.
Business conditions DI: The BOJ Tankan diffusion index measuring firms' perception of business conditions: the percentage reporting "favorable" minus the percentage reporting "unfavorable." A positive value indicates improvement.
Economic Condition Index (CI): An index published by the Cabinet Office showing quantitative changes in the economy. It includes leading, coincident, and lagging indices used to assess current conditions and near-term prospects.
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.