TOKYO : The Bank of Japan is likely to debate whether to raise interest rates when it meets next week and unveil a plan to roughly halve bond purchases in coming years, sources said, signaling its resolve to steadily unwind its massive monetary stimulus.
FILE PHOTO: The Japanese national flag waves at the Bank of Japan building in Tokyo, Japan March 18, 2024. REUTERS/Kim Kyung-Hoon/File Photo
"The decision will be a close call and a hard one to make," given uncertainty over the consumption outlook, one of the sources said."It's really a judgment call, in terms of whether to act now or later this year," another person said. However, recent weak consumption and household sentiment have helped policy doves make the case for holding off for now and waiting for more data to see whether tax cuts and rising wages will lift consumption as projected.
BOJ Governor Kazuo Ueda has said the central bank will hike rates if it is convinced that solid economic and wage growth will keep inflation around its 2 per cent in coming years, as projected. "For the BOJ, there is still a long way to go. Another rate hike will still keep Japan's monetary condition very loose," a second source said, a view echoed by two more sources.At this month's meeting, the BOJ will also release details of a quantitative tightening plan on how it will taper its huge bond buying in the coming one to two years, and shrink its nearly $5 trillion balance sheet.
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