BOJ to weigh rate hike next week, detail plan to halve bond buying, Reuters reports

The Bank of Japan is likely to debate whether to raise interest rates when it meets next week and unveil a plan to roughly halve bond purchases in coming years, sources said, signaling its resolve to steadily unwind its massive monetary stimulus.

The rate decision will depend on how long the board members prefer to wait for clarity on whether consumption will recover and keep inflation stably around the bank's 2% target, said four people familiar with the BOJ's thinking.

Over three-quarters of economists polled by Reuters expect the central bank to stand pat this month and possibly next move in September or October, but sources suggested the outcome of the July 30-31 meeting was considerably less certain.

"The decision will be a close call and a hard one to make," given uncertainty over the consumption outlook, one of the sources said. "It's really a judgment call, in terms of whether to act now or later this year," another person said.

While the nine-member board broadly agrees on the need for a near-term rate hike, there is no consensus on whether it should happen next week or later in the year, they said.

Core inflation hit 2.6% in June, having exceeded the BOJ's target for well over two years, and workers' base pay rose by the most in three decades in May, enough to for hawks to argue that conditions are right to hike rates now.

However, recent weak consumption and household sentiment have helped policy doves make the case for holding off for now and waiting for more data to see whether tax cuts and rising wages will lift consumption as projected.

The outcome of next week's meeting is uncertain in part because the BOJ sees no compelling reason to rush, with price rises still moderate and inflation expectations stable near