The Bank of Japan's Policy Board agreed that consumer price declines resulting from structural changes in Japan's distribution system are "not a bad thing" and should be distinguished from deflationary drops, according to the minutes of their Feb. 10 meeting released Monday.

Some board members pointed out that, as there remains room for restructuring in the distribution sector, consumer prices could fall due to the lower prices offered by new growth firms entering this sector. The intensification of competition caused by the entry of firms such as volume retail stores for clothing could force prices down, the minutes said.

One member noted that slight declines in consumer prices achieved through companies' efforts to improve services to consumers could boost consumption, which would in turn underpin production and other business activity.

Taking those points into account, many board members agreed that a decline in price statistics could be consistent with an economic recovery accompanied by structural adjustment. and that further examination of price developments is necessary.

The nine-member board also discussed long-term interest rates, which remain low and stable. One member referred to the possibility of an "undesirable rise" in the rates fueled by, for example, growing concern about the nation's fiscal condition.

With financial institutions actively purchasing government bonds, the member called attention to the possible impact on the financial system of large losses arising from a plunge in government bond prices.

On the BOJ's commitment to maintaining the "zero interest-rate policy" until deflationary concerns are dispelled, one board member said the central bank should consider whether it can make the phrase more concrete by setting numerical criteria or by providing details of its judgments.

Under the policy adopted by the board in February 1999, the central bank steers its target rate for unsecured overnight call money as low as possible in order to prop up economic activity.

At the Feb. 10 meeting the board decided to maintain the policy, although two members -- Nobuyuki Nakahara and Eiko Shinotsuka -- voted against its continuation.