— Adds Details, Background From 12th Paragraph

TOKYO (MNI) – An unidentified Bank of Japan board member said the
additional stimulative impact of the expansion of super-low, fixed-rate
money market operations was limited, the minutes of the April 6-7
policy-setting meeting released on Monday showed.

“One member expressed the view that additional effects on interest
rates on term instruments had been marginal so far, partly because room
for a further decline in these interest rates had already been limited,”
the minutes said.

Meanwhile, “some members pointed to the fact that interest rates on
term instruments on the whole had declined somewhat, yields on T-Bills
had been stable at low levels and Euroyen rates, which had previously
been more or less unchanged, had decreased,” they said.

At the March 16-17 meeting, the BOJ board voted 5-2 to double the
super-low interest lending facility to Y20 trillion, with board members
Miyako Suda and Tadao Noda voting against the proposal.

The decision to inject additional funds to cover three-month cash
needs among commercial banks also included doubling the frequency of the
new operation launched in December to twice weekly.

“Some members expressed the view that the expansion of the
fixed-rate operation conducted in March had reaffirmed the bank’s stance
of continuing to consistently make contributions as the central bank,
and that this had helped underpin business confidence,” said the minutes
of the April 6-7 meeting.

“A few members said that such reaffirmation of the bank’s stance
and the consequent improvement in business confidence might have
affected, to some extent, stock prices and foreign exchange rates
recently,” the minutes showed.

At both the April 6-7 and April 30 policy-setting meetings, the BOJ
board voted unanimously to maintain the target for the overnight lending
rate among commercial banks at 0.1%, the lowest possible level without
hurting market functions.

After conducting a string of credit-easing measures to inject
liquidity into the banking system, the central bank has noted that
corporate funding is becoming easier for many firms as costs of raising
cash among lenders have fallen.

“Financial conditions, with some lingering severity, have shown
increasing signs of easing,” the BOJ said in its monetary policy
statement on April 7.

This is slightly more upbeat than its statement in the previous
month that “the financial environment, with some lingering severity, has
continued to show signs of improving.”

“One member commented that close examination was necessary with
regard to how the recent policy measures affected bank lending rates,”
the minutes said.

On risk factors for the economy, the minutes said that “some
members mentioned that firms’ medium- to long-term growth expectations
had not shown clear improvement, and this continued to be a downside
risk factor.”

Some members judged that “the employment and income
situation was exiting the worst phase,” the minutes said.

Still, “many members said that they maintained their assessment
that the employment and income situation was severe because firms
continued to regard their workforces as excessive, as evidenced by the
fact that a large number of firms’ continued to apply for employment
subsidies, for example.”

On global market moves, the minutes said, “Many members were of the
view that global financial markets had regained stability on the whole,
mainly reflecting the fact that the world economy had been on a recovery
trend and market concerns about the fiscal deficit problem in some
European countries had subsided.”

However, some board members said that “there were a number of
concerns in global financial markets, including the fiscal deficit
problem in advanced economies, and that attention should be paid to the
possibility that the market might become unstable again if some
particular event sharply unsettled investors.”

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

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