The Bank of Japan is approaching the upper limit of its target for buying bonds, raising prospects it will need to expand the scope of its stimulus program to support the economy before a tax increase.
The BOJ bought ¥6.8 trillion worth of sovereign notes in December, the least since it boosted the program to more than ¥7 trillion a month in April, data compiled by Totan Research Co. show. The buys may slow further to avoid exceeding the average annual target of a ¥50 trillion increase in the BOJ's holdings for the year, said Tokai Tokyo Securities Co. and Totan, a Tokyo-based research unit of money-market broker Tokyo Tanshi Co. The holdings swelled by ¥50.3 trillion in the nine months that ended Dec. 31.
BOJ Gov. Haruhiko Kuroda could signal to the market that a slowdown does not represent a scaling back of his accommodative policy or he could raise the holdings ceiling, according to Sumitomo Mitsui Banking Corp. The government's plan to increase the sales tax to 8 percent in April from 5 percent is forecast to trigger a 4.3 percent economic contraction in the second quarter. The 10-year sovereign bond yield was at 0.66 percent Monday, compared with 2.82 percent in the U.S.