Former BOJ director analyzes central bank's future actions: no rate hikes before September

Makoto Sakurai,Gold exchange a former banker of the Bank of Japan, said on Monday that the bank may reduce its bond purchases by about 24 trillion yen (152 billion dollars) annually in new guidance next month but will not raise interest rates at least until September.

At Friday's policy meeting, the Bank of Japan decided to start reducing its massive bond buying and will announce a detailed plan in July to shrink its nearly five trillion dollar balance sheet, marking another step towards unwinding its large-scale monetary stimulus.

Governor Kazuo Ueda did not specify how much the Bank of Japan would reduce its bond purchasing, only stating that the reduction would be significant.

In an interview with Reuters, Sakurai said: "The Bank of Japan could opt to reduce purchases by one trillion yen per month, but since the governor said the cutbacks will be 'significant,' it is likely to reduce by about two trillion yen."

The Bank of Japan currently purchases about six trillion yen of government bonds each month, with the purchase amount ranging between five and seven trillion yen. Sakurai expects the monthly purchase amount to be reduced to four trillion yen.

The Bank of Japan decided to announce its bond purchase reduction plan at the next meeting on July 30-31, increasing uncertainty over whether short-term rates will be raised at the same meeting or postponed to later this year to avoid market turmoil.

Sakurai said the Bank of Japan would likely forgo a rate increase in July, waiting for more clear signs on whether summer bonus payments and wage growth will boost consumer spending. Sakurai maintains close ties with current policymakers.

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