Bank of Japan officials are considering maintaining a large balance sheet for the central bank even after it achieves its inflation target, reducing the risk of a surge in long-term bond yields, sources said.
Under the potential strategy, the BOJ would use cash from maturing securities in its portfolio to buy long-term government debt, the sources said, asking not to be named as the talks are private. Gov. Haruhiko Kuroda and his colleagues have yet to meet their inflation target, and pledge to continue asset purchases until consumer prices are rising at a 2 percent pace.
The possibility of permanently large balance sheets — in Japan's case, now amounting to more than half the size of the economy — may become a global legacy of unprecedented stimulus measures. The BOJ discussions parallel preparations at the U.S. Federal Reserve to avoid an exit strategy of asset sales.