"Bank of Japan Expected to Keep Interest Rates Steady... Key Issue is Whether to Reduce Government Bond Purchases"

Japan's central bank, the Bank of Japan (BOJ), is expected not to raise interest rates at the Monetary Policy Meeting scheduled for the 13th and 14th, Sankei Shimbun reported on the 9th.

According to the report, the BOJ is likely to hold off on raising interest rates at this meeting to confirm whether the rise in prices and wages leads to a virtuous cycle in the economy. The BOJ ended its negative interest rate policy for the first time in 17 years by raising the benchmark interest rate from -0.1% at the March Monetary Policy Meeting, but it made no changes to the rate at the meeting at the end of April.

Kazuo Ueda, Governor of the Bank of Japan
Photo by AFP·Yonhap News

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At this meeting, Sankei reported that a key issue will be whether the BOJ will reduce the amount of long-term government bond purchases, which it has maintained at 6 trillion yen (approximately 52.9 trillion won) per month. If the amount of bond purchases decreases, interest rates will rise, narrowing the interest rate gap between the U.S. and Japan, which is a major factor behind the weak yen (Yen depreciation).

In this regard, BOJ Governor Kazuo Ueda stated during his appearance at the House of Councillors (upper house) on the 6th that "it is appropriate to reduce the (bond purchase) amount." A source from the Japanese securities industry said, "There is a possibility that the BOJ will lower the (bond purchase amount) to about 5 trillion yen (approximately 44 trillion won)," but also predicted that the effect on curbing the weak yen will be very limited.

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