BOJ expected to scale back bond purchases

The Bank of Japan is expected to discuss tapering bond purchases at its policy meeting that ends on Friday. With the Bank of Japan expected to discuss tapering bond purchases at its policy meeting that ends on Friday, some investors expect the central bank to lay the groundwork for raising interest rates next month. Governor Kazuo Ueda and his fellow board members are likely to keep the policy rate between 0% and 0.1% at the end of their two-day meeting, according to a majority of economists surveyed by Bloomberg. The majority see the board opting to reduce bond purchases by about 6 trillion yen ($38.6 billion) a month. People familiar with the matter said earlier this month that the BOJ is likely to assess whether the timing is right to slow down its bond purchases. The tapering would mark the BOJ’s first clear move toward quantitative tightening since it moved away from its stimulus program in March and toward policy normalization. Although the bank has said it is not targeting exchange rates, a change in debt purchases or a clear hawkish signal could also help ease persistent pressure on the yen. “The BOJ is in a difficult position. The size of its bond purchases is still very large. If they are too cautious in cutting, that could push the yen lower. At the same time, if they are too aggressive, bond yields could rise sharply,” said Izuru Kato, chief economist at Totan Research.