The Bank of Japan’s policy board was divided at its June 15-16 meeting over whether to stop reducing its government bond purchases, minutes of the meeting showed Wednesday.
According to the minutes, one board member argued that there was “no reason at all to halt the reduction of the purchase amount” because the government bond market remained stable.
The member warned that if market participants interpreted the move as monetary financing, it “could undermine the credibility of the bank.”
However, most board members agreed that “it would take some time for investors in Japan, including banks and individual investors, to smoothly increase their JGB holdings” and that, “if the current pace of reduction were to be continued, this might have an unforeseen impact on market stability.”
Some members noted the need to clearly explain that halting the reduction of the bond purchase amount would be “a measure aimed at preventing the JGB markets from becoming unstable” and not at supporting government financing.
During the meeting, a Cabinet Office representative urged the BOJ to “take appropriate action for market stability” regarding its JGB purchases.
The BOJ board eventually voted seven to one to stop slowing the pace of JGB buying next April. The dissenting member was Naoki Tamura.
