BOJ poised to raise interest rates in upcoming meeting

The Bank of Japan (BOJ) is expected to discuss raising interest rates at its upcoming meeting and reveal a plan to reduce bond purchases by about half in the coming years, indicating its commitment to unwind its extensive monetary stimulus gradually.

The decision on rates will hinge on the board members’ willingness to wait for clarity on consumption recovery and maintaining inflation around the two per cent target, according to sources familiar with the BOJ’s stance.

While most economists anticipate the central bank to maintain its current stance this month and potentially adjust rates in September or October, the outcome of the July meeting is uncertain.

“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.

The BOJ is likely to raise rates in the near future, with Governor Kazuo Ueda emphasising the importance of sustained economic growth to support inflation targets.

In addition to potential rate adjustments, the BOJ will outline a plan to reduce bond purchases over the next one to two years, aiming to shrink its balance sheet while avoiding sharp increases in yields.

Attribution: Reuters