BOJ of Japan receives requests to pause or slow bond reduction
The Bank of Japan has received a considerable number of requests to pause or slow down the pace of reducing its bond purchases from fiscal year 2027, the minutes of a meeting between the central bank and financial institutions showed on Tuesday (2).
The requests, made at the Bank of Japan's meeting with bond investors on May 21 and 22, will be taken into consideration when the bank reviews its bond reduction plan through March next year and when it presents a new plan for fiscal 2027 at its June 15 and 16 meeting.
The minutes raise the chance that the central bank will be cautious in its quantitative tightening plan - in in the works since 2024 as part of President Kazuo Ueda's efforts to unwind a massive, decade-long stimulus program.
Under the plan, the Bank of Japan has been gradually reducing bond purchases and is currently decreasing monthly purchases by 200 billion yen ($1.25 billion) each quarter.
Markets are watching for clues about whether the Bank of Japan will pause tapering and continue buying Japanese government bonds at the current pace of about 2.1 trillion yen per month in the fiscal year starting in April 2027.
"There is no need to reduce further because even if the Bank of Japan continues purchasing at the current rate of 2.1 trillion yen, its reserve balance will fall significantly in the medium to long term and could put pressure on the money market," said a participant at the meeting.
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Two other participants also called for maintaining the current pace of monthly bond purchases beyond fiscal 2027, with one of them arguing that the current level of purchases is comparable to that seen before the central bank introduced a massive asset purchase program in 2013, according to the minutes.
"To provide currency in line with economic growth, the Bank should continue a certain scale of bond purchases," a fourth opinion showed.
Other participants called on the Bank of Japan to reduce monthly bond purchases by 100 billion yen or 200 billion yen each quarter, according to the minutes.
Source: CNN