BOJ’s Ueda reaffirms resolve to trim bond buying as bank eyes policy exit

By Thomson Reuters Jun 6, 2024 | 12:10 AM

By Leika Kihara

(Reuters) – Bank of Japan (BOJ) Governor Kazuo Ueda said on Thursday it would be appropriate to reduce the central bank’s bond buying as it moves toward an exit from massive monetary stimulus.

In March, the BOJ made a landmark shift away from its radical monetary stimulus by ending eight years of negative interest rates and yield curve control (YCC), a policy that caps the benchmark 10-year yield around 0% with huge bond buying.

But it pledged to keep buying roughly 6 trillion yen ($38.5 billion) worth of government bonds per month to stop the March policy shift triggering an abrupt spike in yields.

“We are still scrutinising market developments since the March decision,” Ueda told parliament. “As we proceed in exiting our massive monetary stimulus, it’s appropriate to reduce” bond purchases, he said.

Ueda also said the BOJ will move “cautiously” in determining when and by how much it raises short-term interest rates “to avoid making any big mistakes”.

Markets are rife with speculation the BOJ may decide as early as its policy meeting next week to taper its huge bond buying and allow market forces to drive yield moves more.

The BOJ currently has 750-trillion-yen ($4.8 trillion) in assets on its balance sheet, nearly 1.3 times the size of Japan’s economy, including government bonds.

($1 = 155.7700 yen)

(Reporting by Leika Kihara; Editing by Muralikumar Anantharaman and Sam Holmes)