The Bank of Japan is expected to reduce its monthly bond purchases by about 2 trillion yen ($12.7 billion) in new guidance planned next month, but hold off on raising interest rates at least until in September, former board member Makoto Sakurai said Monday.
At its meeting on Friday, the BOJ decided to start reducing its massive bond purchases and announce in July a detailed plan to reduce its balance sheet by nearly $5 trillion, taking another step in the removal of its massive monetary stimulus measures.
Governor Kazuo Ueda gave few clues about the extent of the BOJ’s reduction in bond purchases, saying only that it will be significant.
“The BOJ has the option to reduce its monthly purchases by just one trillion yen. But since the governor said the scale would be “significant,” there is a good chance it will reduce its purchases of about 2 trillion yen,” Sakurai said in an interview with Reuters.
The BOJ currently buys around 6 trillion yen of government bonds per month, with room for 5-7 trillion yen.
The BOJ’s decision to announce its bond reduction plan at its next meeting on July 30-31 has heightened uncertainty over whether it will raise short-term interest rates at that same meeting, or whether it will wait until later in the year to avoid disrupting the markets.
Sakurai, who has close ties to current politicians, said the BOJ would likely hold off on raising rates in July and wait to see whether summer bonuses and wage increases will help the recovery. of consumption.
“The next interest rate hike will probably happen in the fall or early next year,” he said.
After ending eight years of negative interest rates in March, the BOJ currently sets the short-term interest rate target in a range of 0-0.1%.
($1 = 157.4300 yen) (Reporting by Leika Kihara and Takahiko Wada; Editing by Stephen Coates)
