Some members of the Bank of Japan’s Policy Board expressed concern during the meeting Oct. 31 that resulted in the surprise expansion in monetary easing, citing negative “side effects” it may have on the economy, the minutes of their meeting show.
Those members said that in light of already historically low interest rate, any positive effect of looser monetary policy in reviving the country’s struggling economy would be not so large, according to the minutes released Thursday.
BOJ Gov. Haruhiko Kuroda pushed past these dissenting opinions to expand the bank’s stimulus program.
“Some members noted that the effects that could be brought about by additional monetary easing would not be worth the accompanying costs and side effects,” the minutes say.
The BOJ upgraded its massive asset purchases from banks in order to increase base money and achieve its 2 percent inflation goal by sometime in the next fiscal year starting April 1.
The move came as a surprise to the government as well as to market participants.
Some Policy Board members added that “the marginal effect of such easing with respect to boosting economic activity and prices would not be large,” and that there is a risk that by buying more Japanese government bonds as part of the expanded stimulus, the BOJ “would be perceived as effectively financing fiscal deficits.”
The BOJ decided during the one-day meeting to expand its “quantitative and qualitative easing” program to keep momentum of lifting inflation expectations within the economy, which has been slowing following the April consumption tax hike.
The minutes say the meeting adjourned for about 10 minutes near its end, suggesting representatives from the Finance Ministry and Cabinet Office urgently informed their offices of the unexpected proposal for easing.
The board split over the decision, with four of the nine-member decision-making body voting against the plan endorsed by Kuroda and his two deputies. It was announced immediately after the meeting.
One member, who voted for the decision, said the additional easing “would promote recovery amid the situation of a virtuous cycle of economic activity . . . and . . . produce stronger effects on corporate profits, employment and wages than in the past.”
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