Latest news with #quantitativetightening
Japan Times
2 days ago
- Business
- Japan Times
Bank of Japan considering smaller reductions in bond buying
Bank of Japan officials are likely to discuss slowing their pullback from buying government bonds at a policy meeting later this month, according to people familiar with the matter. The officials will probably discuss making smaller reductions to the central bank's bond buying from the current paring pace of ¥400 billion ($2.8 billion) per quarter, according to the people. The internal debate is centered on whether to slow the pace of reductions to ¥200 billion per quarter from April next year or maintain the current pace, the people said. An amount between ¥200 billion and ¥400 billion is also possible, they said. The new plan will cover about one year, the people added. Gov. Kazuo Ueda's board is scheduled to conduct a review of the existing bond-buying program through March next year and map out a plan for purchases beyond that period at its two-day policy gathering ending June 17. The meeting will take place after Ueda clearly indicated that the bank will continue to pare back its purchases, prompting market players to focus on the scale of reductions and the duration of the new plan. Under the existing plan, the BOJ will roughly halve its monthly purchases to about ¥3 trillion early next year after embarking on quantitative tightening last summer. The BOJ is likely to state its readiness to step into the market in exceptional cases as a sign of flexibility, the people said.
Bloomberg
21-05-2025
- Business
- Bloomberg
BOJ Hearings Underscore Divergent Opinions on Bond Tapering Pace
The Bank of Japan heard mixed views from market participants over two days on how quickly it should taper its bond buying, input that will help guide its quantitative tightening plans as signs of strain build in the bond market. A wide range of opinions had been expected from participants including megabanks, regional lenders, securities firms and life insurers ahead of the hearings. Those with larger government debt holdings, such as local banks and lifers, were seen as likely to favor a slower pace of reductions to ensure a smooth transition, with recent jumps in yields illustrating that the pulling back of central bank buying isn't without risk.
CNA
15-05-2025
- Business
- CNA
Japan's fiscal woes put BOJ bond taper plans to test
TOKYO: Talk of big fiscal spending and a subsequent spike in super-long yields are raising questions over just how quickly the Bank of Japan can taper its bond purchases, adding to the challenges it faces in removing remnants of its massive monetary stimulus. While the BOJ is unlikely to ramp up bond buying, the rise in super-long yields could affect its decision on the pace and composition of future quantitative tightening (QT), say analysts and sources familiar with the central bank's thinking. "Having ditched yield curve control last year, long-term interest rates are no longer monetary policy tools for the BOJ," one of the sources said. "The key would be whether the rise in super-long rates affects yields for other maturity zones." Yields on super-long Japanese government bonds (JGB) have risen steadily since April even as those on other maturities remain stable, with the 40-year yield hitting a record high of 3.445 per cent on Thursday. While the rise is driven partly by dwindling demand from life insurers, it also reflects market expectations of Japan's worsening finances as lawmakers escalate calls for huge spending and tax cuts ahead of an upper house election slated for July. "Investors are shunning super-long bonds on worries about Japan's fiscal problems. That's eroding liquidity and causing market distortions unseen in the past," said Katsutoshi Inadome, senior strategist at Sumitomo Mitsui Trust Asset Management. While the BOJ's QT plan is unlikely to have a direct effect on its rate-hike path, a spike in bond yields could hurt business confidence and make it harder to convince the public of the need to push up short-term borrowing costs. The market rout comes at a delicate time for the BOJ, which will review at next month's policy meeting an existing QT programme running through March, and come up with a bond taper plan for April 2026 onward. Under the current plan laid out last year, the BOJ has been slowing bond purchases by around ¥400 billion (US$2.74 billion) per quarter to halve monthly buying to ¥3 trillion by March 2026 - a pace that will diminish the bank's US$3.9 trillion balance sheet by up to 8 per cent. Next week, the BOJ will conduct consultations with banks, insurers and other market participants for their views on the desirable pace of tapering. The findings will serve as a basis for the board's decision on the QT plans at the Jun 16-17 rate review. NO QUICK FIX The QT plan is a crucial part of the central bank's strategy to wean the economy off decades of ultra-loose monetary policy. After a fairly smooth start with an end to negative rates and bond yield control last year, its policy normalisation has been disrupted by US President Donald Trump's tariffs, which are expected to cause some delay in raising short-term rates from 0.5 per cent. Many analysts expect the central bank to make no change to its current QT plan, and roughly maintain or slightly slow the pace of tapering from fiscal 2026, to avoid upending markets. The recent spike in super-long bond yields could draw calls from market participants for the BOJ to fine-tune the composition of the bonds it buys. It may also discourage the BOJ from pursuing a faster taper in future QT plans, analysts say. Taking note of the "significant rise" in super-long yields, one board member said the BOJ must pay attention to liquidity conditions for each maturity at the June QT review, according to a summary of opinions at the April 30-May 1 meeting. "The hurdle for changing the current taper size is extremely high," though the rise in super-long yields could affect discussions on future QT plans, another source said. As with the existing QT plan, the new programme extending beyond April will seek to give markets predictability on the tapering pace, while leaving the BOJ some flexibility in adjusting purchases, the sources said. That may prove tricky if market distortion persists, or leads to a broader bond sell-off driven by waning market trust over Japan's finances, analysts say. Although Prime Minister Shigeru Ishiba has resisted calls to cut the consumption tax rate, he is under pressure from within his party to compile a fresh spending package - a move that will add to Japan's huge public debt. Mari Iwashita, executive rates strategist at Nomura Securities, points to structural factors that may keep bond markets fragile, such as the BOJ's diminishing presence, waning appetite for super-long bonds and a political over-reliance on fiscal spending.
CNA
15-05-2025
- Business
- CNA
Analysis:Japan's fiscal woes put BOJ bond taper plans to test
TOKYO :Talk of big fiscal spending and a subsequent spike in super-long yields are raising questions over just how quickly the Bank of Japan can taper its bond purchases, adding to the challenges it faces in removing remnants of its massive monetary stimulus. While the BOJ is unlikely to ramp up bond buying, the rise in super-long yields could affect its decision on the pace and composition of future quantitative tightening (QT), say analysts and sources familiar with the central bank's thinking. "Having ditched yield curve control last year, long-term interest rates are no longer monetary policy tools for the BOJ," one of the sources said. "The key would be whether the rise in super-long rates affects yields for other maturity zones." Yields on super-long Japanese government bonds (JGB) have risen steadily since April even as those on other maturities remain stable, with the 40-year yield hitting a record high of 3.44 per cent on Monday. While the rise is driven partly by dwindling demand from life insurers, it also reflects market expectations of Japan's worsening finances as lawmakers escalate calls for huge spending and tax cuts ahead of an upper house election slated for July. "Investors are shunning super-long bonds on worries about Japan's fiscal problems. That's eroding liquidity and causing market distortions unseen in the past," said Katsutoshi Inadome, senior strategist at Sumitomo Mitsui Trust Asset Management. While the BOJ's QT plan is unlikely to have a direct effect on its rate-hike path, a spike in bond yields could hurt business confidence and make it harder to convince the public of the need to push up short-term borrowing costs. The market rout comes at a delicate time for the BOJ, which will review at next month's policy meeting an existing QT programme running through March, and come up with a bond taper plan for April 2026 onward. Under the current plan laid out last year, the BOJ has been slowing bond purchases by around 400 billion yen ($2.74 billion) per quarter to halve monthly buying to 3 trillion yen by March 2026 - a pace that will diminish the bank's $3.9 trillion balance sheet by up to 8 per cent. Next week, the BOJ will conduct consultations with banks, insurers and other market participants for their views on the desirable pace of tapering. The findings will serve as a basis for the board's decision on the QT plans at the June 16-17 rate review. NO QUICK FIX The QT plan is a crucial part of the central bank's strategy to wean the economy off decades of ultra-loose monetary policy. After a fairly smooth start with an end to negative rates and bond yield control last year, its policy normalisation has been disrupted by U.S. President Donald Trump's tariffs, which are expected to cause some delay in raising short-term rates from 0.5 per cent. Many analysts expect the central bank to make no change to its current QT plan, and roughly maintain or slightly slow the pace of tapering from fiscal 2026, to avoid upending markets. The recent spike in super-long bond yields could draw calls from market participants for the BOJ to fine-tune the composition of the bonds it buys. It may also discourage the BOJ from pursuing a faster taper in future QT plans, analysts say. Taking note of the "significant rise" in super-long yields, one board member said the BOJ must pay attention to liquidity conditions for each maturity at the June QT review, according to a summary of opinions at the April 30-May 1 meeting. "The hurdle for changing the current taper size is extremely high," though the rise in super-long yields could affect discussions on future QT plans, another source said. As with the existing QT plan, the new programme extending beyond April will seek to give markets predictability on the tapering pace, while leaving the BOJ some flexibility in adjusting purchases, the sources said. That may prove tricky if market distortion persists, or leads to a broader bond sell-off driven by waning market trust over Japan's finances, analysts say. Although Prime Minister Shigeru Ishiba has resisted calls to cut the consumption tax rate, he is under pressure from within his party to compile a fresh spending package - a move that will add to Japan's huge public debt. Mari Iwashita, executive rates strategist at Nomura Securities, points to structural factors that may keep bond markets fragile, such as the BOJ's diminishing presence, waning appetite for super-long bonds and a political over-reliance on fiscal spending. "Such structural factors are irreversible, and not something the BOJ alone can fix," she said. ($1 = 146.1700 yen)
Zawya
15-05-2025
- Business
- Zawya
Japan's fiscal woes put BOJ bond taper plans to test
TOKYO - Talk of big fiscal spending and a subsequent spike in super-long yields are raising questions over just how quickly the Bank of Japan can taper its bond purchases, adding to the challenges it faces in removing remnants of its massive monetary stimulus. While the BOJ is unlikely to ramp up bond buying, the rise in super-long yields could affect its decision on the pace and composition of future quantitative tightening (QT), say analysts and sources familiar with the central bank's thinking. "Having ditched yield curve control last year, long-term interest rates are no longer monetary policy tools for the BOJ," one of the sources said. "The key would be whether the rise in super-long rates affects yields for other maturity zones." Yields on super-long Japanese government bonds (JGB) have risen steadily since April even as those on other maturities remain stable, with the 40-year yield hitting a record high of 3.44% on Monday. While the rise is driven partly by dwindling demand from life insurers, it also reflects market expectations of Japan's worsening finances as lawmakers escalate calls for huge spending and tax cuts ahead of an upper house election slated for July. "Investors are shunning super-long bonds on worries about Japan's fiscal problems. That's eroding liquidity and causing market distortions unseen in the past," said Katsutoshi Inadome, senior strategist at Sumitomo Mitsui Trust Asset Management. While the BOJ's QT plan is unlikely to have a direct effect on its rate-hike path, a spike in bond yields could hurt business confidence and make it harder to convince the public of the need to push up short-term borrowing costs. The market rout comes at a delicate time for the BOJ, which will review at next month's policy meeting an existing QT programme running through March, and come up with a bond taper plan for April 2026 onward. Under the current plan laid out last year, the BOJ has been slowing bond purchases by around 400 billion yen ($2.74 billion) per quarter to halve monthly buying to 3 trillion yen by March 2026 - a pace that will diminish the bank's $3.9 trillion balance sheet by up to 8%. Next week, the BOJ will conduct consultations with banks, insurers and other market participants for their views on the desirable pace of tapering. The findings will serve as a basis for the board's decision on the QT plans at the June 16-17 rate review. NO QUICK FIX The QT plan is a crucial part of the central bank's strategy to wean the economy off decades of ultra-loose monetary policy. After a fairly smooth start with an end to negative rates and bond yield control last year, its policy normalisation has been disrupted by U.S. President Donald Trump's tariffs, which are expected to cause some delay in raising short-term rates from 0.5%. Many analysts expect the central bank to make no change to its current QT plan, and roughly maintain or slightly slow the pace of tapering from fiscal 2026, to avoid upending markets. The recent spike in super-long bond yields could draw calls from market participants for the BOJ to fine-tune the composition of the bonds it buys. It may also discourage the BOJ from pursuing a faster taper in future QT plans, analysts say. Taking note of the "significant rise" in super-long yields, one board member said the BOJ must pay attention to liquidity conditions for each maturity at the June QT review, according to a summary of opinions at the April 30-May 1 meeting. "The hurdle for changing the current taper size is extremely high," though the rise in super-long yields could affect discussions on future QT plans, another source said. As with the existing QT plan, the new programme extending beyond April will seek to give markets predictability on the tapering pace, while leaving the BOJ some flexibility in adjusting purchases, the sources said. That may prove tricky if market distortion persists, or leads to a broader bond sell-off driven by waning market trust over Japan's finances, analysts say. Although Prime Minister Shigeru Ishiba has resisted calls to cut the consumption tax rate, he is under pressure from within his party to compile a fresh spending package - a move that will add to Japan's huge public debt. Mari Iwashita, executive rates strategist at Nomura Securities, points to structural factors that may keep bond markets fragile, such as the BOJ's diminishing presence, waning appetite for super-long bonds and a political over-reliance on fiscal spending. "Such structural factors are irreversible, and not something the BOJ alone can fix," she said. ($1 = 146.1700 yen) (Reporting by Leika Kihara; additional reporting by Takahiko Wada and Kevin Buckland; Editing by Sam Holmes)
