By Satoshi Sugiyama
TOKYO- The Bank of Japan will decide to start tapering its monthly bond buying at this week’s policy meeting, nearly two-thirds of economists said in a Reuters poll, taking an important first step toward eventually reducing its ballooning balance sheet.
The findings show a majority of economists are convinced the Japanese central bank is laying the groundwork, possibly earlier than expected, for monetary policy tightening at a time most other major central banks are leaning toward easing.
BOJ policymakers are brainstorming ways to slow its bond buying and may offer fresh guidance as early as the two-day policy-setting meeting ending on Friday, Reuters reported.
Nearly two-thirds of economists, or 20 of 32, projected the BOJ would make a decision on bond buying, according to the June 3-7 poll. That was up sharply from 41 percent , or 11 of 27, in May.
“There is no longer any reason to continue large-scale purchases of government bonds since it has been judged that a 2 percent rise in prices is within reach,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
The BOJ’s balance sheet is 750 trillion yen ($4.77 trillion), nearly 1.3 times the size of Japan’s economy.
The risks of renewed selling pressure on the yen will also increase if the BOJ does not address rolling back bond purchases this month, said Kazutaka Maeda, economist at Meiji Yasuda Research Institute.
A 16 percent minority of economists said the central bank would make the decision at its July policy meeting, while 9 percent said September. The rest chose either some time in October or after. One said the BOJ would not reduce its pace of bond purchases any time soon.
There were few changes in the June poll compared with last month’s on the policy interest rate. All but one predicted the BOJ would hold its short-term rate in a 0-0.1 percent range at its policy meeting this week.
A 92 percent majority (49 of 53) said that rate would rise to at least 0.20 percent by year-end, up slightly from 88 percent (43 of 59) in the May poll.
Nearly half of respondents, 27 of 55, said the policy rate would jump to between 0.20 percent and 0.50 percent in the July-September quarter, virtually the same proportion as last month’s survey.
