A Bank of Japan policymaker saw the need to expand monetary easing to attain the central bank’s elusive 2% target while another said it should consider a clear path toward that goal, a summary of its April policy meeting showed Tuesday.
At the April 26-27 gathering, the BOJ projected that the target will not be met before Gov. Haruhiko Kuroda’s current term ends in April 2023 despite years of aggressive easing.
“Achieving the price stability target is not easy. Therefore, in the conduct of monetary policy, it is necessary for the bank to take advantage of a tailwind of the expected economic recovery and enhance monetary easing so as to achieve the target,” the summary quoted one member as saying.
The BOJ is unlikely to achieve the goal anytime soon after the coronavirus pandemic made it far more difficult. Sharp cuts in data usage fees by major Japanese mobile operations are also expected to weigh on the core consumer price index, a key gauge of inflation, in the coming months.
“In view of the post-COVID-19 era, it is necessary to continue to carefully consider the path toward achieving the price stability target of 2%,” one member said. “Along with its commitment, it is extremely important for the bank to have effective communication with the general public so that people can advance their understanding of monetary policy.”
The BOJ expects the year-on-year change in the core CPI to be slightly negative “for the time being” but turn positive and increase gradually thereafter. Still, it is projected to rise by only 1% in fiscal 2023, far from the 2% inflation target.
At the policy meeting, the BOJ decided to leave its ultraloose monetary policy unchanged amid heightened uncertainty over the impact of the COVID-19 crisis.
The meeting came a month after the BOJ tweaked its policy kit in an attempt to make monetary easing more effective and sustainable amid the prospect that it will have to keep its accommodative stance longer than previously expected.
According to the summary, one member said financial markets have interpreted the BOJ’s intention behind the March decision “without misunderstanding,” while another described the markets’ response as “calm.”
Minutes of the March meeting have shown that some board members were careful not to give the impression that the BOJ became less accommodative with the fine-tuning.
The BOJ decided at the time to allow 10-year Japanese government bond yields to move more widely even under its “yield curve control” scheme to keep both short-term and long-term interest rates low and stable. It also removed a target for buying exchange-traded funds at an annual rate of ¥6 trillion to make purchases more flexibly when needed.
The summary of opinions is compiled by Gov. Kuroda and does not attribute comments to individual members.
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