BoJ is releasing briefing material from its meeting with bond market participants; received various views from participants in the survey incl. the idea to reduce monthly buying to JPY 2-3tln or have it at around JPY 4tln

Width

• Should be reduced to 0 as soon as possible.


• Reduced to JPY 1-2tln/month before going further.


• Reduction to c. JPY 2-3tln/month is desired.


• Given investor holding power, JPY 3tln/month is desired.


• Domestic bank purchase needs are limited, JPY 4tln/month is desired.

Pace

• Rapid reduction, then a gradual one to offset concern and prevent volatility.


• Step-by-step reduction pace.


• Plan reductions over c. 2 years, to avoid unnecessary volatility.


• Opinions from bond market participants on the pace of tapering incl. the idea to taper at a set pace swiftly, taper swiftly and then moderately in several stages, or reduce buying gradually over two years.

Reduction Guidance

• Maintain flexibility by showing purchase amounts in a range for the quarter.


• Fixed value guidance could spark volatility.


• Show purchase plans via maturity for a two year ahead period.

Remaining Maturity Timeframe

• Focus on short-to-mid term, to reduce volatility.


• Priorities reduction in zones under 10yrs.


• Prioritise ultra-long to reduce duration.

Other

• Consider selling existing bonds alongside reducing purchases.

Analysis details (07:53)

• Note, some of the above lines have been translated from Japanese to English with AI assistance.


• Expectations via Bloomberg for the bond buying size once the reduction has occurred are c. JPY 5tln/month (currently 6tln/month); however, Governor Ueda has described the expected reduction as "sizeable", a remark which led to former BoJ member Kiuchi commenting that "...it could even be as low as JPY 3tln".


• Next meeting on 31st July, will also feature the release of the outlook report.

09 Jul 2024 - 07:50- Fixed IncomeEconomic Commentary- Source: Newswires/BoJ