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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.”

On the future course of monetary policy, many members agreed that the central bank “will need to take additional policy measures if the downside risk to the economy increased further.” Some members proposed setting a higher target for the outstanding balance of current accounts at the BOJ and enhancing money market operations “by, for example, increasing outright purchases of Japanese government bonds.”

Meanwhile, Heizo Takenaka, state minister for economic and fiscal policy, said the government expects the BOJ “to conduct quantitative easing measures in a timely manner, taking into account deflationary pressure emerging during the period of adjustment.”

He attended the meeting as a representative of the government.

In response to Takenaka’s remarks, BOJ Gov. Masaru Hayami said he expects the government to understand that the central bank is doing its utmost to map out the best monetary policy, while it “would welcome constructive suggestions by the government at monetary policy meetings.”

The panel voted unanimously to leave the monetary policy unchanged at the July meeting.

It decided Tuesday to raise the total amount of cash reserves in current accounts held at the BOJ by financial institutions to some 6 trillion yen from 5 trillion yen and to increase its outright purchases of outstanding long-term Japanese government bonds to 600 billion yen a month from 400 billion yen.

The central bank also released minutes from a June 28 meeting of its policy-setting panel on Friday.

The minutes show most members agreed that “the downside risk was increasing” in the Japanese economy, with one member saying the economy would deteriorate further in the July-September quarter.

On monetary policy, one member said the BOJ “should maintain its stance of responding to economic conditions in a timely manner.”

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