During meetings Oct. 10 and 11, the Bank of Japan Policy Board discussed the validity of introducing inflation targets in an effort to combat deflation, according to minutes released Friday.
Some panel members and a government representative voiced opposition toward the move, the minutes say.
“Some members said it was not appropriate to adopt inflation targeting in the current economic situation, since there was a strong probability that the negative effects on the economy and the financial system, such as damage to the credibility of economic policy and to financial markets, would exceed the positive effects,” the minutes state.
One panel member said that given the current climate — with various policy measures due to be implemented to accelerate the disposal of nonperforming loans at banks — achieving a numerical target for inflation through an appropriate mechanism would not be feasible, according to the minutes.
Some lawmakers in the ruling bloc have called on the BOJ to adopt targets of this kind to halt deflation, but BOJ Gov. Masaru Hayami has repeatedly rejected the idea.
The minutes say one panel member said the BOJ has already adopted an inflation-targeting policy in a broad sense.
The member said the BOJ has “made a commitment to continue the quantitative easing measure until the consumer price index registers stably at zero percent or an increase year on year.”
The member also said that inflation targeting “would inevitably require extreme measures that would have serious risks or adverse effects,” according to the minutes.
The minutes state that opposition to the introduction of inflation targets was shared by a government representative from the Finance Ministry.
The representative “did not think it was appropriate to adopt it in the current (economic) situation, and this was the majority view in the ministry,” according to the minutes.
The official said the government wants the BOJ to “consider purchasing a certain amount of government bonds outright over a set period of time” before discussing other measures, the minutes say.
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