The Bank of Japan (BOJ) should speed up the pace of reducing its government bond purchases as the possibility of a pause in interest rate hikes would give the central bank more wiggle room to adjust its tapering plans, Mizuho Financial Group's head of markets told Reuters.

Kenya Koshimizu, co-head of the global markets department at the Bank of Japan, Japan’s third-largest lender, made the call ahead of the BOJ’s June review of its existing bond reduction program.

The voices of key market players such as Mizuho will form the basis of the upcoming review, as the Bank of Japan's shrinking influence in debt markets has boosted the importance of private banks, which are hoped to re-emerge as major buyers of Japanese government bonds (JGBs).

"The pace of tapering of quantitative easing was very modest last year" because of concerns that it could cause a sudden spike in bond yields if combined with rate hikes, Koshimizu said in an interview on Friday.

However, due to the increasing uncertainty in US policies and the global economy, it is difficult for the central bank to continue raising interest rates for the time being. "The Bank of Japan may have greater flexibility in adjusting its tapering plan," he said.

U.S. President Donald Trump’s tariff plans have rattled financial markets and raised fears of a global recession, making it less clear whether the Bank of Japan will be able to continue raising interest rates.

Under the quantitative tightening (QT) plan drawn up last year, the Bank of Japan will reduce its bond purchases by about 400 billion yen each quarter, halving monthly purchases to 3 trillion yen by March 2026.

Koshimizu declined to comment on the appropriate pace of emissions cuts, but added: "It doesn't have to be as gentle as last year."

"We should now focus on restoring the functioning of our nation's bond markets," he said, especially as the biggest shift in U.S. policy in decades roils global markets.

The Bank of Japan holds about half of outstanding Japanese government bonds, which puts pressure on the market's liquidity and price discovery functions.

Asked under what conditions Mizuho would start full-scale purchases of Japanese government bonds, Koshimizu said it would "depend on the circumstances."

He hinted at the possibility of buying U.S. Treasuries after reducing exposure in recent years. "Global economic uncertainty has heightened the appeal of highly liquid products," he said.

Koshimizu said he was confident about Japan's prospects in the long run because escaping deflation has allowed Japanese companies to shift their focus from cutting costs to promoting growth.