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.
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