Bank of Japan considering smaller reductions in bond buying

Bank of Japan officials are likely to discuss slowing their pullback from buying government bonds at a policy meeting later this month, according to people familiar with the matter.

The officials will probably discuss making smaller reductions to the central bank’s bond buying from the current paring pace of ¥400 billion ($2.8 billion) per quarter, according to the people.

The internal debate is centered on whether to slow the pace of reductions to ¥200 billion per quarter from April next year or maintain the current pace, the people said. An amount between ¥200 billion and ¥400 billion is also possible, they said. The new plan will cover about one year, the people added.

Gov. Kazuo Ueda’s board is scheduled to conduct a review of the existing bond-buying program through March next year and map out a plan for purchases beyond that period at its two-day policy gathering ending June 17.

The meeting will take place after Ueda clearly indicated that the bank will continue to pare back its purchases, prompting market players to focus on the scale of reductions and the duration of the new plan.

Under the existing plan, the BOJ will roughly halve its monthly purchases to about ¥3 trillion early next year after embarking on quantitative tightening last summer.

The BOJ is likely to state its readiness to step into the market in exceptional cases as a sign of flexibility, the people said.