BY Leika Kihara
TOKYO — The Bank of Japan is expected to keep interest rates steady next week and consider slowing reductions in its bond purchases from next fiscal year, a move that would signal its preference to move cautiously in normalising still-easy monetary policy.
But BOJ Governor Kazuo Ueda may deliver a less dovish tone on the interest rate outlook on prospects of a de-escalation in global trade tensions caused by US President Donald Trump and persistent sticky domestic food inflation, analysts say.
“If trade negotiations between countries proceed and uncertainty over trade policies diminish, overseas economies will resume a moderate growth path. That, in turn, will accelerate Japan’s economic growth,” Ueda said in a speech last week, signaling the BOJ’s readiness to keep raising rates.
At its two-day meeting ending June 17, the BOJ is widely expected to leave its short-term policy rate unchanged at 0.5 percent.
Markets are focusing on the board’s review of an existing bond-tapering plan running through the March end of the current fiscal year, and the announcement of a new programme that will likely extend through fiscal 2026.
Sources have told Reuters the BOJ will make no big changes to the current taper plan and consider slowing the pace of tapering from next fiscal year – a move that signals a preference to avoid big market disruptions.
