More Than Half of Economists Expect Bank of Japan to Reduce Government Bond Purchases Next Week

The Bank of Japan (BOJ) is increasingly expected to reduce the scale of its government bond purchases at the June monetary policy meeting scheduled for next week. Expectations for a base interest rate hike are also being brought forward.

[Image source=AFP Yonhap News]

According to a survey conducted by Bloomberg News on the 7th targeting 50 economists, 54% of respondents anticipated that the BOJ would reduce the current monthly government bond purchase amount of 6 trillion yen at the meeting on June 13-14. Only 20% responded that the BOJ would not reduce the purchases.

This is analyzed as a measure in response to the recent depreciation of the yen. 70% of respondents cited the yen's weakness as the reason for the reduction in purchases. Shinichiro Kobayashi, Chief Economist at Mitsubishi UFJ Research and Consulting, explained, "At this point, reducing government bond purchases is the best way to put a brake on the yen's depreciation," adding, "As expectations for a reduction in bond purchases spread in the market, there is also a risk of a sharp drop in the yen without such measures." Kazuo Ueda, Governor of the BOJ, also gave more weight to this outlook by stating at the parliament the previous day that "it is appropriate to reduce government bond purchases."

Additionally, one-third of the economists participating in the survey expected the BOJ to raise interest rates in July. Considering that only 19% responded similarly in the April survey, this is interpreted as a growing expectation for a rate hike. However, only one out of the 50 respondents expected an interest rate hike this month. Marcel Thillient, Asia-Pacific Regional Head at Capital Economics (CE), forecasted, "The BOJ will raise interest rates in July."

Bloomberg News also reported that BOJ officials are expected to discuss whether they should provide detailed forecasts on the scale of purchases at next week's meeting to reduce market uncertainty. The outlet explained that since the BOJ abolished yield curve control (YCC) in March, it has become more difficult for the market to predict the trajectory of the bond market, and that the reduction in government bond purchases on May 13 also led to market turbulence.

This content was produced with the assistance of AI translation services.