Some on BOJ board see CPI gains cooling


Some Bank of Japan policymakers think the recent rise in consumer prices is likely to slow, and there are calls to provide a thorough explanation of how the BOJ intends to achieve its 2 percent inflation target, the minutes of their November policy meeting released Thursday said.

“One member pointed to the possibility that it might take some time until the narrowing of the negative output gap is reflected in prices, and that the pace of the increase in inflation expectations might become moderate,” the minutes of the central bank’s Nov. 20 to 21 meeting said.

Another said the year-on-year rises in the consumer price index “would gradually lessen” in pace, the minutes show. It also said one member was “closely monitoring” whether Japan can continue to see inflation rise amid a global deflationary trend.

Core prices, excluding fresh foods but not energy, rose 0.9 percent in October from a year ago, but markets widely expect the pace to moderate due to the fading effects of the weakening yen and high energy prices.

To end deflation, the BOJ launched a radical quantitative easing policy in April to artificially stoke 2 percent inflation in two years by doubling Japan’s monetary base via huge purchases of government bonds and risky debt.

One member said it was important to achieve an increase in wages per employee, rather than in aggregate employee income, for prices to rise via an increase in inflationary expectations.

On the prospects for wages, members agreed that a pickup in employee income was likely to become clearer, backed by a recovery in economic activity and business performance.

But one noted that even if large firms increase wages, “the spillover to small firms would be marginal, and thus the aggregate effects of the increases could be limited,” the minutes said.

Another said developments in external demand were important to achieve wage hikes, as firms are unlikely to do so merely on expectations for exiting deflation in a situation where the economy is facing structural problems, including population decline.

Referring to the slowdown in growth expressed by gross domestic product data for July-September, one member said: the deceleration in the growth rate “might not be a temporary development but rather could represent a downward shift in its trend,” the minutes said.

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