TOKYO (MNI) – Two Bank of Japan policy board members judged that it
was not appropriate to conduct additional easy policy as Japan’s economy
continued moving in line with the view that the board has predicted,
the minutes of the March 16-17 policy-setting meeting released on Monday
showed.

“First enhancing easy monetary conditions as this time — when
economic activity was somewhat stronger than, and price developments
were broadly in line with, the interim assessment in January 2010 and
there had been no sudden change in financial markets — would make it
difficult to maintain good communication with the market because such
action was inconsistent with the monetary policy framework adopted so
far,” one of the two members who were against conducting additional easy
policy said, the minutes showed.

Meanwhile, member Miyako Suda said, “there was no solid
justification for enhancing easy monetary policy conditions, because
recently released economic data were broadly in line with the Bank’s
economic outlook,” according to the minutes.

The two members, Tadao Noda and Miyako Suda, dissented from the
expansion of the measure to encourage a decline in longer-term interest
rates by substantially increasing the amount of funds to be provided
through the fixed-rate operation at the meeting.

The BOJ board members at the meeting voted unanimously to leave the
target for the overnight lending rate among commercial banks practically
zero, at 0.1%, while expanding the scale of its new fixed-rate money
market operation to add more liquidity.

The BOJ policymakers voted, 5 to 2 (there were two board vacancies
at the time of the meeting), to double the total sum of the super-low
interest lending facility to Y20 trillion.

The decision to boost injections of funds to cover three-month cash
needs among commercial banks also included raising the frequency of the
new operation launched in December to twice weekly from the current
weekly.

“Given that the amount outstanding of funds provided by special
funds-supplying operation to facilitate corporate financing will
gradually decline from April 2010 onward, the bank will expand the
measure to encourage a decline in longer-term interest rates by
substantially increasing the amount of funds to be provided through the
fixed rate operation,” the BOJ said on March 17.

The minutes also showed that the representative at the meeting from
the Ministry of Finance had asked for an expansion of the fund-supplying
operations.

hinoue@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4833 **

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