Business / Economy

BOJ members voiced concerns about ability to hit inflation target, minutes of October meeting show

Reuters

Bank of Japan policymakers debated at their October policy meeting whether extra easing measures were needed to hit the central bank’s 2 percent inflation target, a summary of opinions showed on Monday as heightened risks continued to threaten a fragile economic recovery.

Some on the BOJ’s nine-member board insisted on the need to communicate to markets that the BOJ would maintain loose monetary policy, given the time need to accelerate inflation to the 2 percent goal, the summary of the Oct. 30-31 meeting showed.

One member said additional easing measures would be needed “without hesitation” if momentum toward achieving the target falters.

“In the current situation where risks are skewed to the downside, the bank should continue to examine whether additional monetary easing will be necessary,” another board member was quoted as saying in the summary.

At the October meeting, the BOJ kept monetary policy steady but introduced new forward guidance to indicate more clearly its readiness to cut rates if needed, underscoring its concern over simmering overseas risks.

In its policy statement last month, the BOJ said it expected short- and long-term interest rates to stay at their present or lower levels, given the possibility that efforts toward achieving the elusive price target could stall.

In the October summary, some board members warned that long-term uncertainties remained high even as short-term risks temporarily eased after progress in U.S.-China trade negotiations.

One board member said the BOJ needed to signal that its policy stance was now further tilted toward monetary accommodation and a “downward bias in the policy rates.”

However, another member said there had been no increase in risks that the inflation target would not be met. The board members are not named in the summary.

Under its yield curve control policy, the BOJ pledges to guide short-term rates at minus 0.1 percent and the 10-year government bond yield around 0 percent. It also buys government bonds and risky assets to accelerate inflation to its price goal.

Policymakers have been under pressure to offset the impact of an overseas economic slowdown with a diminishing toolkit as soft global demand hurts the nation’s export-reliant economy.

Given heightened risks to the outlook, Prime Minister Shinzo Abe on Friday asked his Cabinet to compile a package of stimulus measures to support the economy and build infrastructure to cope with natural disasters.