The Bank of Japan (BOJ) stated in its latest review that its gradual reductions in Japanese government bond (JGB) purchases since summer 2024 have gradually influenced interest rate formation. The review noted that the recent rise in long-term interest rates has been partly driven by fundamental factors like underlying inflation. The BOJ observed a steady improvement in JGB market functioning, with long-term interest rates forming more freely. While Japanese investors, including banks and households, have increased their JGB holdings, the BOJ expects portfolio adjustments to take some time and will continue to monitor these developments.