TOKYO (MNI) – A few Bank of Japan board members at the Nov. 15-16
policy meeting warned that the BOJ must be watchful of recent weak
economic data and the negative impact of the strong yen on Japan’s
fragile economic recovery, according to the minutes released by the BOJ
on Tuesday showed.

“A few members said that they would carefully examine whether the
weakness observed in some economic indicators related after the previous
meeting was temporary,” the minutes showed.

With regard to monetary policy, “members shared the view that it
was appropriate to steadily implement the BOJ’s decision in August and
October to increase the total size of the Asset Purchase Program through
the purchases of financial assets, and to monitor the spread of its
effects.”

The policymakers also discussed the impact of the persistently
strong yen on Japan’s export-led economic recovery.

“Members reaffirmed their view that, in a situation where global
market participants were intensifying their risk-averse behavior, the
yen – considered a relatively safe asset – was being bought mainly
because there was no better alternative,” the minutes showed.

They also said, “There members continued, however, that where
uncertainty regarding the outlook for overseas economies was high – as
in the current situation – due attention needed to be paid to the
possibility that the appreciation of the yen would exert adverse effects
through decreases in exports and corporate profits as well as a
deterioration in business sentiment.”

One member warned, “attention needed to be paid to the risk that,
if Japanese firms’ shift of production sites to overseas accelerated
sharply in response to the surge in the yen’s appreciation, this shift
would exceed the pace of development of new business and industries in
Japan, thereby prolonging adverse effects on domestic employment.”

At an unscheduled policy meeting on Nov. 30, the BOJ board voted
unanimously to continue the bank’s very stimulative, practically zero
interest rate policy by maintaining the target for the overnight lending
rate among commercial banks at zero to 0.1%.

The policymakers also decided to boost dollar-funding operations
with other major central banks, which they hope will ease pressures in
global money markets caused by the European sovereign debt crisis.

Interest rates on the fixed-rate U.S. dollar funding operations by
the BOJ will be reduced by 0.5 percentage points, said the bank.

The new rate will be a prevailing U.S. dollar overnight index swap
market rate that corresponds to the duration of the loan plus 0.5
percentage points.

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

[TOPICS: M$J$$$,M$A$$$,MMJBJ$,MAJDS$,MT$$$$]