JP: BoJ MPB Minutes

June 20, 2017 06:50 CDT

The Bank of Japan has published the minutes of the meeting of the Monetary Policy Board held April 26 and 27. At this meeting, members of the MPB left policy settings unchanged, keeping the short-term rate for excess reserves at minus 0.1 percent and retaining the target level for the 10-year government bond yield at around zero percent. Members also concluded that maintaining the BoJ's purchases of government bonds at an annual pace of Y80 trillion would be appropriate to meet their 10-year yield target.

Consistent with the statement published immediately after the April meeting, the minutes note that officials considered the Japanese economy to have shifted from a moderate recovery trend to a "moderate expansion", reflecting a positive contribution from exports, business fixed investment and private consumption. MPB members expressed confidence that domestic demand would likely remain on an "uptrend" over the medium-term, with external demand also expected to stay positive.

The minutes' discussion of the inflation outlook notes that tighter labour market conditions had yet to translate into an appreciable pick-up in wages growth, with an entrenched "deflationary mindset" among the public cited as a factor making it difficult for firms to raise their selling prices and increase wages. These factors suggested to most members that inflation would build only gradually and that risks to this outlook remained skewed to the downside.

Reflecting this assessment, updated inflation and growth forecasts were published at the April meeting. Officials announced they expect core inflation to average 1.4 percent in the fiscal year starting April 2017, 1.7 percent in the fiscal year starting April 2018, and (excluding the impact of a planned sales tax increase) 1.9 percent in the fiscal year starting April 2019. Median forecasts for real GDP growth in the current and next two fiscal years were 1.6 percent, 1.3 percent and 0.7 percent respectively.

The policy settings retained at the April meeting were also left unchanged at the BoJ's subsequent policy meeting, held last week. The statement accompanying this meeting noted that officials continue to expect the year-on-year change in the CPI to reach 2.0 percent sometime "around" the fiscal year starting in April 2018. At his post-meeting press conference BoJ Governor Haruhiko Kuroda indicated that recent data did not suggest that an upward revision to inflation forecasts was required for now. In particular, he noted that wage growth remained modest despite a recent improvement in the output gap and stressed that it will take time to change consumers' "deflationary mindset".

The minutes of last week's meeting are scheduled for publication on July 24, while the BoJ's next policy meeting is scheduled for July 19 and 20. The BoJ will also publish updated growth and inflation forecasts in its quarterly outlook report on July 20.

The Bank of Japan publishes minutes following its monetary policy board meetings with a four or five week lag. The minutes expand upon the BoJ's post-meeting announcement.

Investors who want a more detailed description of Bank of Japan opinions will generally read the minutes closely. The MPB may issue a statement after its monthly meeting but the minutes will be much more detailed. In particular they will reveal who voted for and against the Committee's decisions and provide a more detailed description of the MPB's thinking. As such, the minutes are a market mover as analysts parse each word looking for clues to future policy.

Once Every 3-4 weeks.