At the pace the central bank is purchasing government bonds, Japan's sovereign debt market will be extinct by 2027.

The ¥616 trillion of JGBs now available to markets would shrink by about ¥52 trillion a year under current policies, making all of the securities either owned by the Bank of Japan or redeemed by the government by March 2027, data compiled by Bloomberg show. While it is unlikely the central bank will keep up net purchases of ¥80 trillion annually and it is hypothetical to assume issuance stays at ¥126.4 trillion every fiscal year, BNP Paribas SA says the threat to the market's proper functioning is real.

"The JGB market is nearly extinct thanks to the BOJ's aggressive stimulus," said Ryutaro Kono, chief Japan economist in Tokyo at BNP Paribas. "Yield curves are extremely important as the sovereign debt market is the core of a country's financial market."