BOJ’s new summary of thinking gives little clue for future policy

Bloomberg, Kyodo

The Bank of Japan released its first summary of opinions from a monetary policy board meeting Friday, providing an outline of what was discussed at the Dec. 17-18 gathering while giving little new guidance on the future course of monetary policy.

Gov. Haruhiko Kuroda edited a summary of opinions presented by the BOJ’s nine board members — who are not identified with their opinions — and by government representatives. The six-page document was laid out in bullet points divided by discussion topics.

One board member said the central bank’s “supplementary” monetary easing steps announced last month could make it difficult to communicate its message to the market.

“I am concerned that the introduction of supplementary measures would be counterproductive, as it would raise awareness about the limits” of the drastic easing policy and “thereby make the bank’s communication with the market more difficult,” the policymaker said.

At the meeting, the BOJ decided to introduce a new program to buy exchange-traded funds consisting of stocks issued by companies actively investing in physical and human capital and extend the average maturity of its Japanese government bond holdings.

Three of the nine Policy Board members — Koji Ishida, Takehiro Sato and Takahide Kiuchi — opposed the new measures, according to the statement released by the BOJ after the meeting.

Following the announcement, the Nikkei stock index jumped by more than 500 points at one point, but soon lost steam and ended the session sharply lower, showing the market’s disappointment after digesting the new measures.

According to the summary, some members argued the measures are expected to enhance a virtuous cycle in the economy and help the central bank smoothly conduct its asset purchase program, while one member said the new ETF purchase program will promote awareness about the importance of effective use of firms’ cash flows in the capital market. But another member said the bank should not extend the average remaining maturity of the government bonds it buys, as it could increase the BOJ’s involvement in the government’s debt management policy.

The member also said the extension could prolong the period that would be required for undoing the ultraloose monetary policy and normalizing it.

The summary, which is different from minutes release at the subsequent policy meeting, is released about a week after each meeting.

  • Aholl Urang

    Fiat money always leads to failure and piling more debt isn’t a wise answer neither.