— Adds Details from 12th Paragraph

TOKYO (MNI) – One Bank of Japan board member said at the March
12-13 policy-setting meeting that the BOJ needs to further clarify its
policy stance of overcoming years of deflation by increasing the scale
of the asset-buying program, the minutes released by the BOJ on Friday
showed.

“One member noted that, in a situation where a correction in the
yen’s appreciation and a pick-up in stock prices were being observed, it
was desirable to help engender potential demand, such as with regard to
firms’ business fixed investment, by further spreading the understanding
of the BOJ’s policy stance-which was clarified at the previous meeting
— throughout the markets,” the minutes said.

The minutes didn’t disclose the name of the board member but the
member is widely regarded to be Ryuzo Miyao, who proposed to increase
the scale of the asset-buying fund at the meeting.

The minutes also said, “This member continued that, from this
viewpoint, it was appropriate to increase the total size of the
(asset-buying) program and earmark this increase for the purchases of
JGBs, as was done at the previous meeting.”

However, “Most members expressed the opinion that, considering the
current economic and price situation, it was appropriate to steadily
implement the BOJ’s decisions at the February meeting and past meetings
to increase the total size of the program through the purchase of
financial assets, and monitor the spread of their effects,” the minutes
showed.

At the meeting, the BOJ board voted unanimously to maintain
practically zero interest rates while deciding to expand its temporary
lending programs aimed at shoring up the economy’s growth potential and
supporting small businesses through commercial banks.

As a result, the total fund available through these pro-growth
lending facilities would be increased by Y2 trillion to Y5.5 trillion.

The central bank left the scale of financial asset-buying fund at
Y65 trillion after raising it from Y55 trillion the previous month.

Miyao proposed that the fund be raised further to Y70 trillion at
the meeting but his proposal was rejected by the eight other board
members.

At the latest policy-setting meeting ended on Tuesday, Miyao didn’t
propose to increase the scale of the asset-buying fund.

In June 2010, the BOJ launched a Y3 trillion loan program for banks
that are lending for or investing in growth areas. The deadline for
applying for this program has now been extended by two years to March
31, 2014, and the total sum will be raised to Y3.5 trillion.

The minutes of the March 12-13 meeting also said, “Some members —
referring to the undersubscription that had recently occurred in the
BOJ’s fixed-rate funds-supplying operation against pooled collateral
with a six-month term, as well as a decline in the bid-to-cover ratios
of that operation with a three-month term — said that the
undersubscription indicated that the effects of the BOJ’s significant
monetary easing had been spreading to financial markets.”

Many members worried about the adverse impact of higher crude oil
price on Japan’s economic recovery as well as the global economy.

“If the rise in crude oil prices were largely attributable to the
heightening of geopolitical risks associated with the situation
surrounding Iran, not only could overseas economies decelerate, but also
Japan’s economic activity could weaken as a result of declines in
corporate profits and households’ purchasing power caused by a
deterioration in the terms of trade, and thus it was necessary to
carefully monitor future development,” the minutes said.

The representative from the Ministry of Finance said “the
government remained highly concerned about downside risks to the
economy.”

On overseas economic developments, “One member noted that, since a
significant recovery in advanced economies could not be expected, it was
necessary to conduct a careful examination of how the global recovery
would manage to increase the pace of growth in a self-sustaining
manner.”

Many board members, according to the minutes, were worried about
adverse effects of higher gasoline prices in the U.S.

“Many members cited the increase in prices, due mainly to the rise
in gasoline prices, and the associated decline in households’ real
purchasing power, in addition to weak housing prices and a further
reduction in fiscal spending,” they said.

On the European issue, “Many members commented that more time would
be needed to overcome the more fundamental challenges, such as (1)
strengthening the financial firewall, (2) enhancing fiscal governance,
and (3) regaining competitiveness of the economy.”

“One of these members added that anxiety would sweep through
financial markets wherever some kinds of problem materialized, and if
the financial firewall was inadequate and it took time to address this
situation, it was highly likely that instability in financial markets
would reemerge,” the minutes said.

tokyo@marketnews.com
** MNI Tokyo Newsroom: 81-3-5403-4833 **

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