Bank of Japan policymakers discussed the potential for further easing at their latest meeting, with one member suggesting another cut to short-term interest rates amid rising expectations for additional stimulus, a summary of their opinions showed Monday.
Lingering concerns over the global economic outlook and the expected impact from the two-point consumption tax hike on Tuesday prompted the Policy Board to decide at its meeting on Sept. 18 and 19 to re-examine the outlook for Japan and prices at its October meeting.
“It is necessary to take additional easing measures pre-emptively,” one of the nine Policy Board members said, adding that “given the current flattening of the yield curve, lowering the short-term policy interest rate is appropriate.”
The summary of opinions is compiled by BOJ Gov. Haruhiko Kuroda and does not provide attribution to individual speakers.
Cutting short-term interest rates would address concerns over falling long-term rates after the yield on the benchmark 10-year Japanese government bond briefly plunged to its lowest level in three years and a month in early September.
The bank maintained its ultraeasy monetary policy at the September meeting, keeping the short-term interest rate at minus 0.1 percent and aiming to guide long-term rates to around zero while maintaining its massive asset-buying program.
Another member of the Policy Board said further easing would be needed, citing the possibility of momentum toward the BOJ’s 2 percent inflation target being lost.
“The bank should examine whether additional easing measures will be necessary,” the member said, adding the BOJ “needs to consider all possible policy measures without preconceptions.”
The member also said it is important to take decisive actions and widely communicate the effectiveness of the policy measures. The comment was made at a time when financial markets are increasingly expecting the BOJ to take action.
Many board members voiced concerns about the slowing of the global economy, adding that firm domestic demand helps drive moderate growth in the domestic economy.
“A pickup in external demand cannot be expected to take place for the time being since a recovery in overseas economies has been delayed,” one board member said.
Some board members said the consumption tax increase to 10 percent from 8 percent could undermine domestic growth.
“It is difficult to be optimistic regarding the outlook for economic activity,” one member said.