BoJ discusses various options about bond buying or tapering with investors
Here are the highlights of Bank of Japan’s (BoJ) Summary of Meeting with investors
One participant said need for further tapering of bond purchases is not high.
One participant said no need for further tapering of bond buying.
One participant said appropriate for BoJ to maintain current pace of bond buying at 2.1 trillion yen per month.
One participant said BoJ should continue buying JGBs at certain size to supply money in line with expansion of economy.
One participant said BoJ should taper by 100 billion yen per quarter, so monthly bond buying slows to around 1.7 trillion yen.
One participant said BoJ should keep tapering, aim to buy around 1-2 trillion yen worth of JGBs per month.
One participant said BoJ's bond buying has fulfilled role of monetary policy, so BoJ should aim to eventually slow purchases to around 1.3 trillion yen per month
One participant said BoJ should slow bond buying until it hits zero, while conducting regular checks on market functioning.
One participant said BoJ should keep tapering, communicate its views on desirable size of balance sheet.
One participant said BoJ should create opportunity to check bond market moves, functions at regular basis.
Market reaction
There seems to be no immediate impact of the release of the BoJ summary of the meeting with investors on the Japanese Yen (JPY). As of writing, USD/JPY trades flat at around 159.70.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
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