JP: BoJ MPB Minutes

July 24, 2017 06:50 CDT

The Bank of Japan has published the minutes of the meeting of the Monetary Policy Board held June 15 and 16. 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. Members voted 7-2 in favour of the decision to keep policy settings unchanged.

Consistent with the statement published immediately after the June meeting, the minutes note that officials considered the Japanese economy had been "turning toward a moderate expansion", reflecting a continued positive contribution from exports, business fixed investment and private consumption. Members agreed that this moderate expansion was likely to continue, supported by highly accommodative financial conditions and significant fiscal stimulus.

Turning to the inflation outlook, most members agreed that the year-on-year rate of change in the consumer price index would likely trend higher towards the target level of 2.0 percent over the forecast period, reflecting their assessment that economic growth would strengthen and that tighter labour market conditions would eventually put upward pressure on wages growth. However, although most members considered that momentum toward meeting the inflation target "was being maintained", they acknowledged once again that their momentum was "not yet sufficiently firm" and that there was still "a long way to go" before the target would be achieved. Members noted that there had recently been discussion about how the BoJ would exit from its current policy stance but indicated that such a move was not likely to take place for a considerable period.

The policy settings retained at the June meeting were also left unchanged at the BoJ's subsequent policy meeting, held last week. Officials also published revised inflation forecasts after their July meeting and it appears that the concerns about the inflation outlook voiced at the June meeting have been reflected in a downgrade to their inflation forecasts. The BoJ now expect to meet the inflation target sometime "around" the fiscal year starting April 2019, after previously estimating that this target would be reached sometime "around" the fiscal year starting in April 2018.

Last week's meeting was also the last for two members of the Monetary Policy Board, Takehiro Sato and Takahide Kiuchi, who have consistently voted and argued against the majority's support for aggressive policy easing in recent years. Their replacements, Goshi Kataoka and Hitoshi Suzuki, will take part in the next policy meeting, scheduled for September 20 and 21, and it is expected they will likely support the majority view.

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.