Some Bank of Japan policymakers warned against premature debate about exiting from its ultraloose policy despite their concern about the rising cost of prolonged easing, according to minutes of the BOJ’s Policy Board meeting in March, reinforcing yet again the challenge of hitting the nation’s elusive inflation target with a diminishing toolkit.
The nine-member board took time debating at the March meeting how to best communicate their policy intentions. Some said growing market interest about when the BOJ could whittle down its massive stimulus program was partly behind the recent market volatility, the minutes show.
“It was important for the BOJ to thoroughly explain to the public … that the economy had not yet reached a phase where it should consider the timing and measures of a so-called exit from monetary easing,” some members said.
“While normalization, or a gradual reduction in the degree of monetary accommodation, could become a topic for consideration in the future, the BOJ needs to explain to markets that normalization … would be different from monetary tightening,” one of them was quoted as saying.
BOJ minutes do not attribute comments to individual Policy Board members.
At the March meeting the BOJ kept policy steady, and Gov. Haruhiko Kuroda signaled readiness to ramp up stimulus if the economy lost steam, in a push-back against speculation it could whittle down monetary support earlier than expected.
The BOJ has a communication challenge as it seeks to play down expectations of an early exit from the easy policy, while warning of the growing cost of prolonged ultralow rates.
“There was a risk financial intermediation would be pulled back if the low-yield environment was further prolonged,” and hurt financial institutions’ profits, one policymaker said.
A few board members called for more scrutiny of the potential demerits of the BOJ’s asset purchases, including its buying of exchange-traded funds, the minutes show.
And yet some board members voiced concern over recent weakness in inflation and consumption, in a sign the BOJ could not afford to dial back stimulus any time soon.
One member said the weakness in the consumption recovery since last summer was a cause for concern, the minutes show.