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TOKYO (MNI) – The Bank of Japan board agreed in early April that
the BOJ should implement the monetary easing decided about two months
earlier and monitor its impact for now, instead of taking more stimulus
measures, the minutes of its April 9-10 policy meeting released Monday
showed.

“Members agreed that it was appropriate to steadily implement the
BOJ’s decision at the February meeting and past meetings to increase the
total size of the program through the purchase of financial assets, and
to monitor their effects,” the minutes said.

Members also agreed that the repeated expansions made to the total
size of the temporary asset-buying program had brought about “some
positive effects” to financial markets.

“Many members commented that, although the effects of monetary
policy were seen in short-term changes in financial markets, such as
those in stock prices and foreign exchange rates, they should be
examined based on how they fed through to economic activity and prices,”
the minutes said.

At its April 9-10 meeting, the BOJ board voted unanimously to
maintain practically zero short-term interest rates to help support a
recovery from deflation but also left the scale of its financial
asset-buying at Y65 trillion after raising it in February.

Later at the April 27 policy meeting, the BOJ board decided to
expand its financial asset-buying fund to about Y70 trillion from Y65
trillion, as widely expected, by raising purchases of long-term Japanese
government bonds and reducing six-month market operations.

The BOJ has left its target for the overnight interest rate among
commercial banks at zero to 0.1% since October 2010, when it lowered it
from 0.1% as part of “comprehensive monetary easing.”

The April 9-10 minutes also said, “Many members pointed that, since
late March 2012, when large-scale redemption of Japanese government
bonds was made, the sense of an abundance of liquidity had grown further
and the bid-to-cover ratios of the BOJ’s fixed-rate funds-supplying
operation against pooled collateral had been declining again.”

On increased JGB purchases under the asset-buying program, “A few
members commented that it was important for the BOJ to continue to
clearly explain to the public the purpose of these JGB purchases, so as
to avoid any deterioration in financial market stability caused by
arousing suspicions that the BOJ had been engaged in monetization.”

These members added that “fiscal sustainability was a prerequisite
for the functioning of monetary policy, in that any undermining of
confidence in fiscal sustainability would have a serious adverse impact
on the stability of the financial system as well as price stability.”

As for risks to Japan’s economy, “A few members noted that, if the
pace of growth in the Chinese economy were to decelerate noticeably,
this would affect the BOJ’s economic outlook, which assumed a rise in
overseas economic growth,” the minutes said.

A few other members voiced concern over a shortage of electric
power this summer caused by the 2011 earthquake and nuclear meltdowns,
saying “attention should continue to be paid to uncertainty regarding
electric power supply in Japan.”

With regard to risks to the outlook for prices, “Members shared the
recognition that careful attention should be paid to future developments
in international commodity prices and in medium- to long-term inflation
expectations.”

“Some members said that there was a risk that crude oil prices
might rise further depending on developments in the Middle East,
although there was not a considerable likelihood for the time being that
upward pressure on commodity prices would intensify given that the world
economy still had not emerged from a deceleration phase,” the minutes
said.

tokyo@marketnews.com
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