Bank of Japan should step in only in a ‘severe’ bond market rout, policymaker says

[TOKYO] The Bank of Japan does not need to make big changes to its bond taper plan and should only ramp up buying in times of “severe market disruption,” its board member Asahi Noguchi said, a sign the bank sees no imminent need to arrest recent sharp rises in super-long bond yields.

Noguchi, a former academic seen as among dovish members of the board, also said the BOJ must move cautiously in raising interest rates to ensure underlying inflation stabilises around its 2 per cent target backed by sustained wage increases.

“It’s crucial that the BOJ take a measured, step-by-step approach,” or spend plenty of time examining the economic impact of each rate hike before moving to the next one, Noguchi said in a speech on Thursday.

At its policy meeting next month, the BOJ will conduct an interim review of its bond tapering plan running through March and come up with a programme for April 2026 onward.

“In my view, it is unnecessary at this point to make any major changes to the current plan,” Noguchi said.

“That said, the bank will need to examine the reduction plan for April 2026 onward from a longer-term perspective,” he said, adding that the BOJ can spend “sufficient time” in reducing the size of the balance sheet.

The BOJ allows markets to set long-term interest rates, while leaving itself some flexibility to change the amount of its bond buying “in case of sudden market swings”, Noguchi said.

“However, such an unusual measure will only be implemented during times of severe market disruption,” he said on the threshold for ramping up the BOJ’s bond buying through emergency market operations. REUTERS