The Bank of Japan Policy Board for the most part dismissed calls to set inflation targets during its July 12-13 meeting, according to minutes of the discussions released Friday.
"The majority of members agreed that it was not appropriate to adopt inflation targeting at present," the minutes say, noting that members felt it was difficult to set a specific numerical target for price stability because prices in Japan are "greatly affected not just by demand-side but also by supply-side factors, such as technological innovation and deregulation." The minutes also say that members believed it would be difficult to attain a specific numerical target for prices by means of monetary policy alone, considering the current circumstances under which "nominal interest rates were close to zero percent and firms were still undergoing substantial balance sheet adjustment."
However, the minutes show one member said the BOJ "should consider adopting inflation targeting to increase the transparency of its objective," adding "a clear distinction should be made between inflation targeting, which could be supported from certain theoretical standpoints, and a policy aimed at creating a certain level of inflation."