Japan’s five-year Japanese government bond auction showed weaker demand, with the bid-to-cover ratio falling to 3.11 from 3.22 and below the 12-month average of 3.47; the ratio was the lowest recorded since February 2026. Separately, the Bank of Japan reduced monthly JGB purchases to 2.9 trillion yen for the January-March 2026 quarter, the lowest level since its quantitative and qualitative easing program began in April 2013. The BoJ’s balance sheet has contracted by about 94.3 trillion yen, or 12.6%, from its 2024 peak, while long-term JGB yields reached 2.35%-2.40% in late March 2026, their highest since February 1999. The yen has traded above 160 per U.S. dollar, increasing imported inflation concerns and complicating the outlook for the upcoming BoJ policy meeting. Reduced central-bank buying is allowing greater price discovery and could draw Japanese capital away from U.S. Treasuries, European sovereign bonds and other foreign markets, while narrowing rate differentials may weaken the yen carry trade. Higher yields also raise borrowing costs for Japan’s government and corporations, whose reliance on ultra-low rates has been reinforced by a government debt-to-GDP ratio described as the highest among developed economies.