The Bank of Japan has postponed the normalization of its policy, announcing that it will introduce a comprehensive plan for scaling back its bond purchasing program at the upcoming July meeting.
During the June session, the policy board, chaired by Ueda Kazuo, resolved to continue purchasing Japanese government bonds, commercial paper (CP), and corporate bonds, in line with the decision from March. However, the board voted 8-1 to reduce these purchases subsequently, aiming to allow long-term interest rates to be shaped more freely by financial markets.
Market expectations were high that the bank would already begin to curtail its bond purchasing program at the June meeting.
The Bank of Japan plans to gather feedback from market participants and, in the next policy meeting, it will finalize a detailed plan for reducing the purchase amounts over the next one to two years.
Currently, the bank is buying approximately JPY 6 trillion worth of bonds each month.
In today's meeting, the board collectively agreed to maintain the uncollateralized overnight call rate at around 0 to 0.1 percent. This follows a rate hike in March, the first in 17 years, marking the end of negative rates as global inflation indicators strengthen.
Marcel Thieliant, an economist with Capital Economics, forecasts that the bank may raise its policy rate to 0.3 percent by July. However, he also cautions that a sharper-than-expected slowdown in underlying inflation could prevent additional tightening measures in the future.
