Latest news with #bondpurchases
Bloomberg
21 hours ago
- Business
- Bloomberg
BOJ's Ueda Hints at Chance of Continuing to Cut Bond Purchases
Bank of Japan Governor Kazuo Ueda hinted that the central bank could continue to slow the pace of government bond purchases next fiscal year, as the board's decision over bond buying approaches. 'Many opinions indicated that it's appropriate to keep cutting the bond purchases while balancing predictability and flexibility,' Ueda said Tuesday, summarizing views expressed by bond market participants at meetings hosted by the BOJ last month. Ueda was responding to questions in parliament.
Japan Times
a day ago
- Business
- Japan Times
BOJ likely to stop cutting bond purchases in next fiscal year, ex-official says
The Bank of Japan will probably decide to stop reducing the amount of its government bond purchases in a plan for next fiscal year when authorities gather this month, as they eye a worrisome surge in JGB yields, according to a former BOJ board member. Since last summer, the bank has been reducing its buying of government bonds by ¥400 billion ($2.8 billion) every quarter, but that process will come to a halt, former board member Makoto Sakurai said in an interview Monday in Tokyo. "They are likely to make a stop,' Sakurai said. "They must be considering that yields will rise further if they go big on cutting bond purchases.' Sakurai was speaking two weeks before the BOJ extends its current bond purchase plan into the fiscal year from April. Traders have been looking for hints regarding the likely pace of pullback, with BOJ watchers holding mixed views on what the optimum rate should be. A recent surge in superlong bond yields reflects the challenges for authorities pursuing a quantitative tightening path. "It's probably the most reasonable solution to halt for now and then mull it over later,' Sakurai said. "It's a little risky to make a long-term commitment' when uncertainties are this high, he added. Owing largely to U.S. President Donald Trump's tariff measures, the murky economic landscape is likely to keep Gov. Kazuo Ueda's board on hold, with the policy rate at 0.5%, until toward the end of this year, Sakurai said. Prior to any move higher, the central bank would need to confirm the resilience in business investment as well as how much room companies have to raise wages next year. That data won't be available until autumn, he said. Sakurai's forecast is more or less in line with the market's. Traders see around a 70% chance of borrowing costs rising by the end of this year, according to overnight index swaps Monday. "October seems a bit too early, but I wouldn't rule it out,' Sakurai said. "It all depends on the data.' The BOJ's nine-member board next sets policy on June 17. A key focus will be on whether the central bank will continue to reduce the amount of government debt buying every three months from the second quarter of next year. At the current pace of cutbacks, monthly bond buying would slide to around ¥2.9 trillion by March. At the BOJ's hearings with bond market participants last month, there were diverse views on the right tempo to cut back debt buying in the future. One participant called for more aggressive cuts to purchases, while another urged that reductions be suspended temporarily, according to minutes of the gatherings released Monday. The nation's 30-year yield has come down to around 2.95% from the 3.185% touched late last month, its highest since the tenor's inception. Still, Japan's bond market faces more challenges with debt sales later Tuesday and Thursday that may ramp up pressure on the government to adjust its borrowing plans and calm investor nerves. Sakurai expects Japan's yields to stay elevated, causing concerns at the Finance Ministry over its implications for Japan's finances. The government's cost for debt servicing has risen to about a quarter of its budget for this fiscal year, thanks partly to higher interest rates. "They must be feeling that a higher yield could be problematic,' Sakurai said. "It's not easy to proceed with further cutbacks in bond purchases for the BOJ.' The BOJ remains the biggest holder of Japanese government debt, owning roughly half of the market after more than a decade of aggressive monetary easing. The bank began quantitative tightening last summer, five months after scrapping its negative interest rate and yield curve control program.
Japan Times
22-05-2025
- Business
- Japan Times
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.
