BOJ dove Noguchi sees no need to change JGB tapering plan
A noted dove on the Bank of Japan's policy board said there's no need to make major changes to the bank's plan for tapering bond purchases, a remark that comes a month before authorities unveil guidelines for bond buying in the period beyond April 2026.
"It is unnecessary at this point to make any major changes to the current plan,' BOJ board member Asahi Noguchi said Thursday in a speech in Miyazaki Prefecture. "The bank will need to examine the reduction plan for April 2026 onward from a longer-term perspective.'
Noguchi spoke a day after the central bank concluded a series of hearings with market participants that will help it determine how fast to wind down its purchases at a time when concerns in the market have led to yield spikes, particularly among longer tenors. The BOJ will update its plans at a board meeting ending June 17.
The BOJ is currently trimming its purchases by ¥400 billion ($2.8 billion) a quarter and is on course to reach monthly buying of around ¥2.9 trillion by the spring of 2026.
In the speech, Noguchi conveyed calm regarding a rise in yields two months ago, when 10-year Japanese government bond yields rose to near 1.6% in March, saying "this rise — albeit rapid — cannot be regarded as disruptive, as it seems to have mainly reflected expectations among market participants of a higher terminal policy rate.'
The current reduction plan, announced in July 2024, means that there will be no policy-driven changes in the BOJ's purchases of Japanese government bonds since the formation of long-term interest rates is left to the market, Noguchi said.
At the same time, it "allows for making flexible changes to the amount of JGB purchases in the case of sudden market swings,' he said. "Even though recovery in market functioning is important, this would be meaningless if it ended up fostering or disregarding market turmoil.'
Noguchi, who voted in favor of the January interest rate hike to around 0.5% after opposing two previous moves, signaled caution over the future policy path partly given rising downside risks stemming from the global trade war. The U.S. faces an "acute increase' in concerns over potential stagflation due to its tariff measures, he said.
Amid high uncertainties, he added, the BOJ's terminal policy rate should not be predetermined based on factors such as the estimated neutral interest rate and the bank should examine carefully the impact of each of its rate hikes.
"I believe that the necessary approach to the future conduct of monetary policy is cautious optimism, keeping a firm eye on growing overseas risks while calmly assessing how the situation unfolds,' he said.
Noguchi spoke as risks are on the rise that Japan's economy may fall into a technical recession following a contraction in the first quarter. April trade data, released on Wednesday, showed that President Donald Trump's tariffs, especially a 25% levy on autos, started hitting Japan's exports, a key pillar of growth.
At the same time, inflation is sticky. Data on Friday is expected to show that gains by consumer prices excluding fresh food accelerated in April to 3.4%, the fastest clip in two years. That would extend the streak at or above the BOJ's target to three years.
Noguchi said data indicate progress toward reaching the BOJ's target, but the goal hasn't yet been met.
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