MNI BRIEF: BOJ Sours On JGB Bond-buying Reduction

The Bank of Japan will likely not reduce the scale of its Japanese government bond purchases, mainly the five-10 year tenor, as concern mounts among bank officials that such a reduction could cause unnecessary bond-yield rises, MNI understands.

Bank officials are worried such a reduction could result in higher bond yields and force the BOJ to conduct further, more extraordinary bond purchases in future to address the issue.

However, the Bank could consider reducing the scale of its programme, if bond supply and demand conditions tighten and the number of bond sellers reduce.

Bank officials also see no reason to change the BOJ's bond-buying range, which it widened in April to increase flexibility of daily open market operations.

The BOJ plans to buy JPY675 billion of JGBs with a five-10 year maturity under a range of JPY450 billion to JPY900 billion, but market players have speculated the bank will soon reduce the scale of its operation.