A member of the Bank of Japan’s Policy Board said at last month’s meeting that fiscal discipline should be maintained even when long-term interest rates remain low, according to minutes of the meeting released Thursday.
The policymaker said the decline in long-term interest rates caused by the BOJ’s unorthodox policy of gobbling up Japanese government bonds posed a risk of eroding its mechanism for maintaining fiscal discipline, the minutes of the two-day meeting through Nov. 19 said.
“This member then expressed the view that such a risk should be given more careful attention,” according to the minutes.
Prime Minister Shinzo Abe postponed a move to complete the doubling of the consumption tax rate to 10 percent, a day before the meeting ended.
The Policy Board agreed that it was crucial to ensure the credibility of fiscal policy and that the government should aim to establish its sustainability, according to the minutes.
They also discussed the effect of the BOJ’s decision to expand the radical “qualitative and quantitative” easing policy at the previous meeting in October.
Among its new measures, the BOJ decided to jack up its JGB purchases from financial institutions so that the amount outstanding will rise at an annual pace of about ¥80 trillion — up by about ¥30 trillion from its previous target — in its bid to stoke 2 percent inflation in “about two years.”
Some board members noted the need for the latest stimulus steps to have a positive impact on household spending and regional economies by raising corporate earnings, employment, wages and capital spending. A member also said the BOJ should put more emphasis on the importance of effecting wage hikes.