According to a report, the Bank of Japan is considering maintaining its current government bond purchase scale starting from the next fiscal year. However, this decision may not be straightforward, as opinions within the policy committee appear divided. Some members prioritize calming market sentiment, while others believe it is necessary to steadily reduce the purchase scale to shrink the central bank's expansive balance sheet.

At its June meeting, the Bank of Japan will review the current bond purchase reduction plan, which runs until next March, and formulate a new plan for fiscal year 2027 and beyond. Four sources familiar with the central bank's thinking indicated that, having made some progress in reducing its balance sheet, there is now a greater internal inclination to pause further reductions in bond purchases.

One source stated that the Bank of Japan actually has the leeway to pause the reduction, as the maturity of existing bonds alone can lead to a significant decrease in holdings. The other three sources expressed similar views.

The sources also revealed that the Bank of Japan may abandon its practice of formulating a reduction plan annually, instead adopting an open-ended framework committing to monthly bond purchases of 2.1 trillion yen.

Separately from the quantitative tightening decisions, the report indicates that to address the risk of rising inflation, the Bank of Japan plans to raise interest rates at its June meeting, increasing the policy rate from the current 0.75% to 1.0%.