The BoJ Balance Sheet Has Started Shrinking in Earnest

The Bank of Japan's March 2026 accounts make the regime change explicit. Total assets stand at 662.1 trillion yen, down from 729.8 trillion a year earlier — a 9.3 percent contraction that closes the door on any pretence that balance-sheet normalisation is hypothetical. Holdings of Japanese government bonds fell by 45.1 trillion yen, and the once-vast scaffolding of the Loan Support Program is being dismantled. The interesting question is no longer whether the BoJ is tightening through the balance sheet. It is how fast, and at what cost to the JGB curve.

Read together, the March figures describe a coordinated drawdown

rather than a passive runoff. JGB holdings have fallen to 530.9 trillion yen, with the Treasury discount bill book at zero — meaning the entire stock now sits in coupon paper that rolls off on a known schedule. Loans excluding those to the Deposit Insurance Corporation are down 19.7 percent year-on-year as the Loan Support Program winds down, and current deposits at the BoJ — the liability side of QE — have shrunk by 70.7 trillion yen, or 13.3 percent. Asset reduction and reserve drainage are moving together, which is what genuine quantitative tightening (QT — the unwinding of central-bank asset holdings) looks like.

What the curve has to absorb

The mechanical implication is that the private sector — domestic banks, life insurers, pension funds and foreign accounts — must take down a larger share of JGB issuance at the margin. A 45.1 trillion yen reduction in the BoJ's bond book is, in effect, that much additional duration

the market now has to price. Term premia in the 10- to 30-year sector have been the obvious pressure point, and on the current trajectory the BoJ's footprint shrinks every month without any new policy decision. The Loan Support Program rundown compounds the effect: liquidity provided through cheap funding facilities is not being replaced, which tightens conditions for regional lenders even before the policy rate moves again.

Set this against the BoJ's broader data release cadence — the April monetary base figures, the Principal Figures of Financial Institutions, the monthly Transactions with the Government file, and the revised direct investment datasets for 2023 and 2024 — and the picture is of an institution publishing the receipts of its own retreat in close to real time. The transparency push extends to securities financing markets, where the BoJ has been building out statistical coverage since its 2020 Review on the subject. For a central bank that spent a decade being the marginal buyer of almost everything, the willingness to document the unwind in granular monthly detail is itself a policy signal.

QT in Japan is no longer a forward statement. It is a 67.6 trillion yen fact.

The dossier offers no quantified forecasts on the pace of further runoff or on where total assets settle by end-2026, and readers should treat the absence as meaningful — the BoJ has not pre-committed to a terminal balance-sheet size, and outside forecasters in this cluster have not filled the vacuum. The operationalisable questions for the next six months are therefore narrow but tractable: does the JGB holding fall through 500 trillion yen by the September reporting date; do current deposits continue to drain at a double-digit annual pace; and does the Loan Support Program book approach zero before the fiscal year ends. Each is directly observable in the same monthly release that produced today's numbers. That is the right standard for a regime that, on this evidence, is being run by accountants rather than announcements.