A few Bank of Japan policymakers pointed out during their meeting last month that structural factors such as firms shifting production abroad could continue to cap exports.
During the July 14-15 meeting, the BOJ Policy Board maintained its assessment that “exports have recently leveled off more or less” but then downgraded this view in the following meeting in August, saying that “exports have shown some weakness.”
Even so, the policymakers agreed that Japan’s exports are likely to increase moderately down the road, supported by a recovery in overseas economies.
Regarding global financial markets, some members said in the July meeting that geopolitical risks, particularly those associated with the situation in Iraq, “continued to warrant attention as they could significantly impact the global economy, mainly through fluctuations in crude oil prices,” according to the minutes of the meeting released Wednesday.
Although board members noted that the performance of some emerging economies such as Thailand has been lackluster, advanced economies have been recovering and are likely to improve moderately.
On prices, members said the underlying trend remains unchanged even after the consumption tax hike in April, and that the year-on-year rate of increase in the consumer price index, excluding the direct effects of the tax hike, was likely to be around 1.25 percent for some time, although some temporary slowdown could be seen through summer.
Looking ahead, some members said that “upward pressure on prices will increase further,” citing an improvement in the output gap and a rise in inflation expectations.
Regarding business investment, several board members said firms are “maintaining a positive attitude,” but a few expressed wariness that “attention needs to be paid to the risk that business fixed investment could deviate downward from firms’ plans,” due to labor shortages.
They said the weakness in some indices relating to construction investment might reflect supply constraints such as labor shortages.