Bank of Japan policymakers said it was necessary to monitor the negative economic impact of continuing monetary stimulus amid stubbornly weak inflation, minutes of their June meeting showed Friday.
The minutes suggest members of the central bank’s Policy Board recognized a need to make policy more flexible, setting the stage for their decision earlier this week to allow long-term yields to rise higher and tweak the bank’s asset purchases.
Many board members pointed out that it was “important to continue to conduct a multifaceted monitoring and assessment of the positive effects and side effects that could arise from the continuation of powerful monetary easing” at the meeting held on June 14 and 15.
One person said the BOJ should make sure its policy does not cause “severe distortions” to economic and financial conditions, while another said that it was necessary to “consider the possible countermeasures against the side effects before they materialized.”
The minutes are released after approval by board members at the following policy meeting and do not attribute comments to individual speakers.
Board members voted 7-2 at their July meeting to maintain the target level for the 10-year government bond, the benchmark of long-term interest rates, at around zero percent while allowing the yield to “move upward and downward to some extent,” a move Gov. Haruhiko Kuroda said improves the sustainability of the ultra-easy policy.
The BOJ’s massive bond purchases had drawn criticism for drying up liquidity and causing a decrease in market trading volume.
The central bank also adjusted the composition of its purchases of exchange-traded funds to lean more heavily on those linked to the Topix stock index rather than the narrower Nikkei average, while saying it may increase or decrease the total amount depending on market conditions.
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