Some Bank of Japan policymakers voiced concern at a meeting last week that the coronavirus pandemic could tip the country back into deflation, a summary of opinions released Wednesday showed.
A return to deflation would be “a considerable obstacle” to eventually achieving the central bank’s 2 percent price stability target, one of the nine Policy Board members said during the June 15-16 meeting.
“Thus, considering this risk, it is necessary to conduct additional easing at this point,” the member said.
The central bank maintained monetary policy unchanged at the meeting, keeping short-term interest rates at minus 0.1 percent while guiding long-term rates to around zero percent.
Another policymaker was also worried about the country’s tepid inflation, saying, “In the conduct of economic measures, it is necessary first of all to minimize the risk of deflation taking hold.”
Japan’s core consumer prices fell for a second straight month in May, down 0.2 percent from a year earlier, as the global spread of COVID-19 lowered the cost of energy and accommodation, the Ministry of Internal Affairs and Communications said Friday.
“The increasing number of bankruptcies of firms as well as suspension and discontinuation of businesses may have a negative impact on employment, prices and finance,” one policymaker said, adding “it is necessary to be vigilant so that the economy will not fall into deflation again.”
As for the economic outlook, one member of the board said, “It seems inevitable that the negative impact on the global economy, including Japan, will become prolonged without effective vaccines and medicines.”
Demand is expected to be pushed down by deterioration in the labor market and “a new lifestyle” that could negatively impact conventional services because of concerns about the risk of COVID-19, another said.
At the latest meeting, the BOJ decided to expand its ¥75 trillion ($700 billion) corporate support measures to ¥110 trillion, in line with the government’s second extra budget to bolster the country’s economy including new programs focusing on assistance for small businesses.
The summary of opinions is compiled by Gov. Haruhiko Kuroda and does not attribute comments to individual speakers.