Morgan Stanley: The Bank of Japan is expected to send a signal to switch to a QT pace this week.

The market generally expects the Bank of Japan to maintain the current 0.5% policy interest rate unchanged this week. The focus of the market is whether it will adjust its plan to gradually reduce the speed of government bond purchases. Under the current policy, the Bank of Japan plans to reduce its government bond purchases by 400 billion yen per quarter, and this plan will continue until March 2026. Bank of Japan Governor Haruhiko Kuroda has previously stated that once the yield curve control policy ends, government bond yields should be determined by the market. JPMorgan Chase expects the Bank of Japan to gradually reduce its bond purchasing pace until March 2026, then may slow the reduction to 200 billion yen per quarter, and gradually reduce the monthly bond purchasing scale to around 2.1 trillion yen before March 2027, and may then stop further reductions.