I've recently read that the Bank of Japan is continuously buying government bonds. Apparently, at the rate they are going, the BoC will own all the bonds by 2026, which means the government will essentially owe all its debt to itself.

What is the point of doing this? And once they buy all the bonds, does it mean that the debt of Japan will be nil?

  • 3
    $\begingroup$ They're trying to spur inflation. Japan has suffered from severe deflation for a long time and have recently become more comitted to fighting it. A way of increasing inflation is to print money. However they have to do something with that money to bring it into circulation, so they buy government bonds. $\endgroup$
    – BB King
    Commented Nov 12, 2015 at 19:43

1 Answer 1


Central banks usually buy back government bonds to combat deflation and facilitate economic growth. This policy is commonly called "quantitative easing" or QE. After the arguable success of QE during 2008-2009 recession in the United States, many other countries choose to adapt this monetary policy.

It is very unlikely that the Bank of Japan will keep this policy until 2026 because at some point inflation will pick up and they will have to stop buying bonds and perhaps even raise interest rates. In the US, UK, and EU the bond-buying quantitative easing programs haven't lasted longer than 5 years and they are usually closely monitored and can be stopped at any time.

When the central bank buys government bonds, they stay on its balance sheet until maturity. Normally, central banks are happy to keep them as a convenient monetary tool. They can sell the bonds back to reduce inflation. Whether the government debt on the central bank's balance sheet can "cancel out" depends on the countries laws.


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