The big picture
The Bank of Japan's August balance sheet shows the monetary base contracting for the first time in months, driven by a sharp reduction in reserve balances and a swing in government deposits to a larger negative position. Outright JGB purchases fell to ¥2.32trn, while redemptions rose to −¥1.78trn, a combination that tightens money market conditions and could push short-term rates upward. Meanwhile, the central bank's collateral framework in Russia remains stable, with the haircut coefficient for a specific federal bond near one, allowing banks to borrow nearly the full market value of the bond. These two developments, though in different markets, both hinge on the mechanics of central bank liquidity provision and its transmission to bond pricing.
On the watchlist
- On 2026-09-08, watch the BoJ's next JGB purchase operation for any further reduction in the monthly amount below ¥2.32trn.
- Watch the BoJ's current account balances for the September release to see if reserve balances continue to fall below ¥390.54trn.
- Watch the Bank of Russia's next collateral list update for any change in the haircut coefficient for bond RU000A10DQB6 from its current level near one.
- Watch the Japanese Ministry of Finance's September reserve assets release to see if official reserve assets decline further from $1.21trn.
Top stories
Why it matters The BoJ's shrinking monetary base, with reserve balances down to ¥390.54trn and government deposits at −¥9.26trn, tightens money market liquidity and could force JGB yields higher, repricing the world's largest bond market.
JGB holdings edged up to ¥519.93trn, while outright JGB purchases continued at a reduced pace of ¥2.32trn, down from the July level. The reduction in the monetary base signals tighter money market conditions, which could put upward pressure on short-term rates and affect the pricing of Japanese government bonds.
The contraction in current account balances reflects a combination of factors: reserve balances fell to ¥390.54trn from the July level, and government deposits swung to a larger negative position of −¥9.26trn. Sales of JGBs to the government under repurchase agreements expanded to −¥37.37trn, up from a negative position in July, indicating increased fiscal cash management operations. Banknotes in circulation stood at ¥114.87trn, while coins remained stable at ¥4.58trn. Corporate bond holdings declined to ¥1.36trn from the July level, and ETF holdings were ¥36.98trn.
For investors, the shrinking monetary base implies a gradual withdrawal of central bank support, which may lead to higher volatility in JGB yields and a steeper yield curve. The BoJ's reduced outright purchases and larger redemptions of −¥1.78trn (versus a negative position in July) suggest a slower pace of balance sheet expansion, potentially increasing the supply of JGBs to the market. This could raise fiscal financing costs, especially as the government prepares a record budget request. The trend bears watching for its impact on long-term rates and the yen.
- Official reserve assets $1.21trn
- Foreign exchange reserves $994.98bn
- Securities in foreign exchange reserves $839.56bn
- Deposits in foreign exchange reserves $155.42bn
- IMF reserve position $11.42bn
- SDRs $61.17bn
Why it matters A stable haircut coefficient near one for this Russian federal bond means banks can continue to borrow almost its full market value, preserving liquidity access for holders of this specific maturity.
The haircut coefficient for this bond is nearly one, and it matures on 27.02.2029, with ISIN RU000A10DQB6. The list covers federal, regional, mortgage, and corporate bonds, each with its own haircut and valuation.
The haircut coefficient directly determines how much liquidity a bank can borrow against each bond: a coefficient of nearly one means the Bank of Russia lends up to almost the full market value of the bond. This mechanism transmits monetary policy by influencing the opportunity cost of holding these bonds versus using them as collateral. For the federal bond in question, the price of 97.69% and value of ₽125.87k reflect current market conditions as of the reporting date.
Compared to the previous list from 01.09.2026, no material changes are evident in the overall structure, but the specific figures for this bond are updated to the new date. Investors in Russian government and corporate bonds should monitor these haircuts, as changes can affect funding conditions for banks and, consequently, demand for the underlying securities.
- Bond price (% of nominal) 97.69%
- Bond value (RUB) ₽125.87k
In brief
Rates & Bonds 5 items
Across five releases, two Eurostat publications describe euro-area money market benchmarks, while national data cover rents, industrial loans, and tax reform requests. Statistics Austria reports average rent with operating costs per dwelling at €695.1 for 2026-Q1, and the Bank of Korea shows industrial loans changing by ₩30.6trn in 2026-Q2. The Japanese Ministry of Finance's tax reform request stands out as the only policy-oriented item.
Equities & Sectors 1 item
The single KfW release indicates that the share of firms expecting a decline in foreign sales is 30% for 2026, a key signal for export-oriented sectors.
FX & Emerging Markets 2 items
Two items cover distinct emerging-market topics: Bangladesh's bond size is BDT 4bn as of 2026-04-30, while the Central Bank of Libya discusses import financing and economic stability with the Ministry of Economy, highlighting policy coordination rather than a specific metric.
No direct market impact 1 item
The Bank of Japan's request for relief measures following Typhoon No. 24 and heavy rain in Kagoshima Prefecture focuses on supporting affected individuals through flexible banking services, with no direct market figures.