TOKYO (MNI) – Many Bank of Japan board members voiced concern over
the impact of high long-term interest rates on the outlook for Japan’s
economy at the December 20-21 policy-setting meeting, the minutes
released by the BOJ on Friday showed.

The minutes said, “Many members expressed the opinion that future
developments in and effects of long-term interest rates needed to be
examined carefully, since fluctuations in these rates would have an
impact particularly on funding costs of firms and households and
financial institutions’ profits, thereby affecting economic activity and
prices as well as financial conditions.”

Japan’s long-term interest rates rose in December in tandem with
the rise in long-term interest rates overseas, increasing the downside
risk to Japan’s economy.

As for the effects of encouraging a decline in longer-term interest
rates, the minutes said, “most members shared the view that purchases
of various financial assets and provision of longer-term funds through
the Program had been exerting downward pressure on such rates, as
evidenced by the decline in interest rates following the introduction of
the Program.”

It also said that “the effects of encouraging such a decline were
difficult to see at present, partly because Japanese long-term interest
rates had risen following the rise in overseas long-term interest
rates.” Despite a growing concern over the negative impact of long-term
interest rates at the December meeting, the board didn’t see an imminent
need for taking additional easy policy.

The minutes also said, “some members said that it was important to
clearly reaffirm that the clarification of the policy time horizon as
part of the BOJ’s comprehensive monetary easing had the effects of
stabilizing short-term market rates at low level.”

The BOJ’s policy board on Dec. 21 voted unanimously to leave the
target for the unsecured overnight lending rate among commercial banks
unchanged in a range between zero and 0.1%.

The policy statement issued after the two-day policy-setting
meeting ended on Dec. 21 indicated that the board maintained the view
that Japan’s economy continues moving in line with the BOJ’s baseline
outlook that it will return to a moderate recovery path after growing at
a slower pace for some time.

tokyo@marketnews.com
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