— BOJ Feb Minutes: One Member Said Should Adopt 2% Inflation Goal
— BOJ Minutes: Many Members: Term ‘Understanding’ May Sound Passive
— BOJ: Some Members: Should Consider Refining Pro-Growth Loans
TOKYO (MNI) – A few members of the Bank of Japan’s board suggested
that one option for the BOJ was to set its new longer-term inflation
goal in a range of 1% to 2%, instead of pinpointing 1%, the minutes of
the BOJ’s Feb. 13-14 policy meeting released on Friday showed.
One argued that the BOJ should follow the norm among other major
central banks and set its price stability target at an annual CPI rise
of 2% while some said there was no need to substantially change what the
BOJ had been aiming at — “a positive range of 2% or lower, centering
around 1%.”
At its February meeting, the BOJ board decided to adopt a more
explicit 1% inflation “goal” and boost its already large-scale
unconventional financial asset buying program in support of that goal.
It also decided to maintain its practically zero interest rate policy.
Some members said it was appropriate “for the time being” to aim to
achieve an inflation rate of 1%, given that the current level of
inflation perceived by the public is relatively low.
“These members continued, however, that the bank could take this
opportunity to change the numerical expression to one that took account
of the possibility that the inflation rate the bank should aim to
achieve could surpass 1% in the longer run,” the minutes said.
“A few of these members said that a numerical expression of 1% to
2% was one option,” they said.
“One member commented that, from a long-term perspective, the bank
should aim to achieve an inflation rate that many other major economies
commonly pursued — at present, 2% — so that the long-term trend of the
foreign exchange rate would not become one-sided.”
In response, a different member said that it was “not necessarily
essential for the bank to aim to achieve the same level of inflation” as
other major central banks, given that the economic situation facing
Japan differed from those faced by other major economies.
The minutes also indicated that the BOJ board looked closely at the
wording of its loose inflation goal adopted in March 2006, called the
board’s “understanding” of desirable price gains.
“Many members expressed the view that the connotation of the term
‘understanding’ that the bank had used thus far might suggest that the
bank was passively waiting for a recovery in the economic and price
situation, and thus did not effectively communicate the bank’s active
stance in its efforts to achieve price stability.”
Some members said the term “target” suggested that monetary policy
would be conducted “in an automatic manner” in response to short-term
fluctuations in prices, so as to maintain a certain level of inflation,
the minutes said.
They also pointed that terms “target” and “definition” had rigid
and inelastic connotations, and that therefore it would not be
appropriate to use these terms in a situation of a high degree of
uncertainty surrounding future developments such as structural changes
in Japan’s economy and movements in the global economic environment.
The same members also noted that the term “benchmark” would entail
some vagueness in terms of representing the BOJ’s policy stance, just
like the term “understanding.”
Based on this discussion, members agreed that it would be
appropriate to refer to the inflation rate that is consistent with
price stability sustainable over the medium to long term as “the price
stability goal in the medium to long term.”
Board members also discussed a possibility of extending and
expanding the BOJ’s growth-oriented lending programs.
The minutes said “many members noted that the deadline for
applications for new loans was March 31, 2012, and said that it was
imperative to examine in the near future whether it was necessary to
extend the deadline.”
“Some of these members, recognizing that strengthening growth
potential continued to be the major challenge for Japan’s economy,
expressed the view that it was appropriate to consider extending the
deadline, and in doing so, examine whether further refinement in the
formulation of the measure was possible.”
Later at its March 12-13 meeting, the board decided to extend the
programs and expand the total fund available through these pro-growth
lending facilities by Y2 trillion to Y5.5 trillion, adding new features.
tokyo@marketnews.com
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