— Adds Details, Background From 10th Paragraph
TOKYO (MNI) – One of the nine Bank of Japan board members argued
that the central bank needs to come up with fresh ideas to boost public
inflation expectations by better fighting the yen’s rise, the BOJ’s
minutes of its Aug. 8-9 policy meeting released Monday showed.
“One member expressed the recognition that, while nearly two years
had passed since the BOJ started to implement the comprehensive monetary
easing measures, Japan’s economy had not yet overcome deflation, and
thus it might be necessary for the BOJ to devise further ways to boost
inflation expectations, such as exerting influence on foreign exchange
rates,” the minutes said.
The minutes did not say how the other board members responded to
this opinion.
On global issues, the board agreed that the European debt crisis
had already exerted a considerable adverse impact on the global economy.
At the August meeting, the BOJ’s policy board voted unanimously to
maintain practically zero short-term interest rates and left the scale
of its financial asset-buying at Y70 trillion after raising it from Y65
trillion in April, as expected.
The BOJ has left its target for the overnight interest rate among
commercial banks at zero to 0.1% since October 2010, when it lowered it
from 0.1% as part of “comprehensive monetary easing” aimed at helping
the economy overcome years of deflation.
The decision reflected the view among the BOJ board that the
Japanese economy was picking up gradually toward a more sustainable
recovery path.
But the global slowdown has hit Japan’s production and exports more
seriously than expected, prompting the BOJ board to conduct further
easing at its latest two-day policy meeting on Sept. 18-19.
Last week the board voted unanimously to jack up the target of its
financial asset-buying program to Y80 trillion from Y70 trillion, citing
that further global slowdown has brought the pickup in the domestic
economy to a halt.
While the BOJ stood pat at the August meeting, the minutes
indicated that board members thought they might have to act quickly to
counter growing downside risks.
“A few members added that it was also important for the BOJ to
fully communicate to the public that it was prepared to take appropriate
policy actions in a decisive manner to secure credibility pertaining to
the timeless of monetary policy conduct,” the minutes said.
On the downside risk to Japan’s recovery from deflation, the
minutes said:
“Some members, noting that households’ and firms’ short-term
inflation expectations were susceptible to actual price developments,
expressed the view that attention should be paid to the possibility of
heightened expectations that price were unlikely to rise, given that the
year-on-year rate of change in the CPI had remained at a low level for a
long time, and this in turn could lead to a slower pace of increase in
prices than that suggested by the improvement in the negative output
gap.”
“One member expressed the view that, considering the experience
gained from the situation seen through 2008, when the output gap turned
positive, it might also take a while before the rate of change in the
CPI for all items less energy and food turned clearly positive, under
the current circumstances.”
On Japan’s economy, the board “shared the recognition that the key
factor was whether domestic demand would remain firm until a recovery of
overseas demand became evident,” the minutes said.
“Some members commented that, even if these (overseas and Japanese)
economies might not experience a significant downturn, the risk that
their deceleration phase would be prolonged was not small, and the
timing for a return of Japan’s economy to a moderate recovery path might
be delayed if such a risk materialized.”
tokyo@mni-news.com
** MNI Tokyo Newsroom: 81-3-6860-4822 **
[TOPICS: M$J$$$,M$A$$$,MMJBJ$,MAJDS$,MT$$$$]
