Officials are also set to review a new bond-buying reduction plan and may slow the pace of balance-sheet reduction from April next year, leaving room for another rate increase later this year.
Bank of Japan officials are likely to discuss lifting the policy rate to 1% at the meeting ending June 16, people familiar with the matter said, with scope for another increase later this year. The discussions are also expected to cover a new plan for reducing bond purchases, while policymakers may slow or even pause reductions from April next year as Japanese government bond market functioning improves. The combination points to continued monetary tightening, but with caution around how quickly the central bank shrinks its holdings of government bonds and other assets.