The central bank's outright purchases of JGBs rose to an all-time high of 135.989 trillion yen ($1.02 trillion) in the year through March, almost double the amount a year earlier, a BOJ filing showed on Monday.
"This is an extraordinary amount when global central banks are tightening their monetary policy," said Keisuke Tsuruta, fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.
"It will depend on the global environment, but the BOJ may have to spend massive amounts again this year if yields come under upward pressure and investors revive their bets on the BOJ's policy change."
The massive bond buying distorted the JGB market by artificially suppressing part of the yield curve and causing illiquidity as the BOJ's ownership of benchmark bonds ballooned.
The BOJ, which remains an outlier in a global wave of monetary tightening by central banks, was forced into massive bond buying to defend its policy cap on the 10-year Japanese government bond yield
With the country's inflation already exceeding the BOJ's 2% target and wages at major firms on the rise, investors bet that the BOJ's yield curve control (YCC) policy, which is uses to steer the benchmark 10-year JGB yield, would not be sustainable.
Speculation for a BOJ policy change accelerated in December after the central bank caught investors by surprise in widening the trading band of the 10-year JGBs to 0.5% from 0.25%.
In a sign that the BOJ may continue aggressive bond buying, the central bank on Friday raised the maximum size of its planned Japanese government bond (JGB) purchases for all maturities over the next three months.
In the previous fiscal year, the central bank made purchases of 72.87 trillion yen in JGBs.
($1=133.4700 yen)
(Additional reporting by Rocky Swift; Editing by Subhranshu Sahu and Jacqueline Wong)
By Junko Fujita
