Highlights
Bank of Japan board members are either wary or pessimistic about whether Japan can achieve 2 percent inflation in a sustained manner after a decade of large-scale monetary easing under Governor Haruhiko Kuroda with a reflationary mission has failed to achieve the goal, according to the summary of opinions expressed at the bank's April 27-28 meeting released Thursday.
The board under the new governor, Kazuo Ueda, a former board member with mostly academic background, endorsed the existing monetary easing policy framework in general to achieve 2 percent price stability but with a publicly stated emphasis on supporting sustainable wage growth.
The summary didn't disclose any specific debates on how and when the bank should prepare for an eventual exit from the framework, which was put in place in September 2016, although the board has been discussing the costs and benefits of the large-scale easing that has lasted for just over a decade.
"The year-on-year rate of increase in the consumer price index (CPI) is likely to be above 2 percent for the time being due to a pass-through to consumer prices of past rises in import prices," one opinion noted."However, it is expected to fall below 2 percent toward the middle of fiscal 2023 with the pass-through peaking out."
Another one said, apparently echoing other voices,"As the output gap improves and as inflation expectations and wage growth rise, CPI inflation is projected to come close to the price stability target of 2 percent. That said, this will take time and there are high uncertainties over the outlook."
There was even a more cautious view:"Attention needs to be paid to future scenarios, such as one where CPI inflation declines to a level well below 2 percent, mainly due to an increase in households' thriftiness and weak real
wages, and does not return to 2 percent."
On the conduct of monetary policy, one opinion pointed to the risk of premature tightening, which was seen in the past."Although price projections have been raised somewhat, the risk of missing a chance to achieve the 2 percent target due to a hasty revision to monetary easing is much more significant than the risk of the inflation rate continuing to exceed 2 percent."
The board was divided over whether to maintain the yield curve control framework.
"As distortions on the yield curve are currently dissipating, there is no need to revise the conduct of yield curve control," one opinion expressed by at least one member said.
But another one was more critical."There are many views that market functioning has remained low, including the functioning of Japanese government bond (JGB) yields as reference rates. Yield curve control seems, in some aspects, to have hampered smooth financing, and attention is warranted on upcoming Bond Market Survey results."
An opinion that appeared to be expressed by Governor Ueda said,"A broad-perspective review of the 25 years since the late 1990s, when Japan's economy faced the effective lower bound on short-term interest rates and the bank stepped in to implement the unconventional monetary policy measures, would provide useful insights for the future conduct of monetary policy."
There was also a view that seemed to be saying the review should not be used a precursor to an exit from the large-scale easing."The review of monetary policy will be useful in, for example, effectively continuing with monetary easing. In order to make it objective and reasonable, this review should be conducted from a broad perspective without bearing a specific policy change in mind."
At the meeting, the nine-member board decided unanimously to maintain its monetary easing stance, keeping its zero to slightly negative interest rate targets along the yield curve and large asset purchases. It was the first one under Ueda, who took office on April 9. He had told lawmakers and reporters that it is"necessary and appropriate" to continue monetary easing under the current economic conditions in order to achieve stable 2 percent inflation and help firms raise wages.
"With extremely high uncertainties surrounding economies and financial markets at home and abroad, the bank will patiently continue with monetary easing while nimbly responding to developments in economic activity and prices as well as financial conditions," the bank said.
"By doing so, it will aim to achieve the price stability target of 2 percent in a sustainable and stable manner, accompanied by wage increases," it said, adding the part about wages in its official statement, the point often made by Kuroda toward the end of his second five-year term.
In a subtle tweak, the bank removed its long-held stance from its policy statement while maintaining its pledge that it will not hesitate to take additional easing measures if necessary. Until at the last meeting, in March, the bank concluded that"it also expects short- and long-term policy interest rates to remain at their present or lower levels."
A few months before the end of his term, Kuroda had said the bank could change this part of its forward guidance because it is mainly designed to minimize the impact of the pandemic.
The board under the new governor, Kazuo Ueda, a former board member with mostly academic background, endorsed the existing monetary easing policy framework in general to achieve 2 percent price stability but with a publicly stated emphasis on supporting sustainable wage growth.
The summary didn't disclose any specific debates on how and when the bank should prepare for an eventual exit from the framework, which was put in place in September 2016, although the board has been discussing the costs and benefits of the large-scale easing that has lasted for just over a decade.
"The year-on-year rate of increase in the consumer price index (CPI) is likely to be above 2 percent for the time being due to a pass-through to consumer prices of past rises in import prices," one opinion noted."However, it is expected to fall below 2 percent toward the middle of fiscal 2023 with the pass-through peaking out."
Another one said, apparently echoing other voices,"As the output gap improves and as inflation expectations and wage growth rise, CPI inflation is projected to come close to the price stability target of 2 percent. That said, this will take time and there are high uncertainties over the outlook."
There was even a more cautious view:"Attention needs to be paid to future scenarios, such as one where CPI inflation declines to a level well below 2 percent, mainly due to an increase in households' thriftiness and weak real
wages, and does not return to 2 percent."
On the conduct of monetary policy, one opinion pointed to the risk of premature tightening, which was seen in the past."Although price projections have been raised somewhat, the risk of missing a chance to achieve the 2 percent target due to a hasty revision to monetary easing is much more significant than the risk of the inflation rate continuing to exceed 2 percent."
The board was divided over whether to maintain the yield curve control framework.
"As distortions on the yield curve are currently dissipating, there is no need to revise the conduct of yield curve control," one opinion expressed by at least one member said.
But another one was more critical."There are many views that market functioning has remained low, including the functioning of Japanese government bond (JGB) yields as reference rates. Yield curve control seems, in some aspects, to have hampered smooth financing, and attention is warranted on upcoming Bond Market Survey results."
An opinion that appeared to be expressed by Governor Ueda said,"A broad-perspective review of the 25 years since the late 1990s, when Japan's economy faced the effective lower bound on short-term interest rates and the bank stepped in to implement the unconventional monetary policy measures, would provide useful insights for the future conduct of monetary policy."
There was also a view that seemed to be saying the review should not be used a precursor to an exit from the large-scale easing."The review of monetary policy will be useful in, for example, effectively continuing with monetary easing. In order to make it objective and reasonable, this review should be conducted from a broad perspective without bearing a specific policy change in mind."
At the meeting, the nine-member board decided unanimously to maintain its monetary easing stance, keeping its zero to slightly negative interest rate targets along the yield curve and large asset purchases. It was the first one under Ueda, who took office on April 9. He had told lawmakers and reporters that it is"necessary and appropriate" to continue monetary easing under the current economic conditions in order to achieve stable 2 percent inflation and help firms raise wages.
"With extremely high uncertainties surrounding economies and financial markets at home and abroad, the bank will patiently continue with monetary easing while nimbly responding to developments in economic activity and prices as well as financial conditions," the bank said.
"By doing so, it will aim to achieve the price stability target of 2 percent in a sustainable and stable manner, accompanied by wage increases," it said, adding the part about wages in its official statement, the point often made by Kuroda toward the end of his second five-year term.
In a subtle tweak, the bank removed its long-held stance from its policy statement while maintaining its pledge that it will not hesitate to take additional easing measures if necessary. Until at the last meeting, in March, the bank concluded that"it also expects short- and long-term policy interest rates to remain at their present or lower levels."
A few months before the end of his term, Kuroda had said the bank could change this part of its forward guidance because it is mainly designed to minimize the impact of the pandemic.
Market Consensus Before Announcement
The summary of opinions from the Bank of Japan's latest policy meeting on April 27-28 is expected to show that board members endorsed the existing monetary easing policy framework in general to achieve 2 percent price stability and support sustainable wage growth. Neither the summary nor the ensuing minutes (June 21) is likely to disclose any specific debates on how the bank should prepare for an eventual exit from the framework put in place in September 2016, although the board has been discussing the costs and benefits of the large-scale easing that has lasted for just over a decade.
At the meeting, the nine-member board decided unanimously to maintain its monetary easing stance, keeping its zero to slightly negative interest rate targets along the yield curve and large asset purchases. It was the first one under Governor Kazuo Ueda, who took office on April 9. He had told lawmakers and reporters that it is"necessary and appropriate" to continue monetary easing under the current economic conditions in order to achieve stable 2 percent inflation and help firms raise wages.
"With extremely high uncertainties surrounding economies and financial markets at home and abroad, the bank will patiently continue with monetary easing while nimbly responding to developments in economic activity and prices as well as financial conditions," the bank said.
"By doing so, it will aim to achieve the price stability target of 2 percent in a sustainable and stable manner, accompanied by wage increases," it said, adding the part about wages in its official statement, the point often made by Haruhiko Kuroda toward the end of his second five-year term.
In a subtle tweak, the bank removed its long-held stance from its policy statement while maintaining its pledge that it will not hesitate to take additional easing measures if necessary. Until at the last meeting, in March, the bank concluded that"it also expects short- and long-term policy interest rates to remain at their present or lower levels."
A few months before the end of his term, Kuroda had said the bank could change this part of its forward guidance because it is mainly designed to minimize the impact of the pandemic.
At the meeting, the nine-member board decided unanimously to maintain its monetary easing stance, keeping its zero to slightly negative interest rate targets along the yield curve and large asset purchases. It was the first one under Governor Kazuo Ueda, who took office on April 9. He had told lawmakers and reporters that it is"necessary and appropriate" to continue monetary easing under the current economic conditions in order to achieve stable 2 percent inflation and help firms raise wages.
"With extremely high uncertainties surrounding economies and financial markets at home and abroad, the bank will patiently continue with monetary easing while nimbly responding to developments in economic activity and prices as well as financial conditions," the bank said.
"By doing so, it will aim to achieve the price stability target of 2 percent in a sustainable and stable manner, accompanied by wage increases," it said, adding the part about wages in its official statement, the point often made by Haruhiko Kuroda toward the end of his second five-year term.
In a subtle tweak, the bank removed its long-held stance from its policy statement while maintaining its pledge that it will not hesitate to take additional easing measures if necessary. Until at the last meeting, in March, the bank concluded that"it also expects short- and long-term policy interest rates to remain at their present or lower levels."
A few months before the end of his term, Kuroda had said the bank could change this part of its forward guidance because it is mainly designed to minimize the impact of the pandemic.
Definition
The Bank of Japan releases the Summary of Opinions expressed by its nine policy board members six business days after each Monetary Policy Meeting.
Description
The BoJ holds eight MPMs a year, in January, March, April, June, July, September, October and December. The BoJ began publishing the summary in 2016 to provide a brief look at what was discussed at the latest meeting as part of its efforts to increase the transparency of the conduct of monetary policy. The governor of the bank holds a news conference at 1530 JST (0630 GMT), a few hours after the release of the monetary policy statement, to discuss the board's policy decision and assessment of the economic and financial conditions. More details become available when the summary is published. Before 2016, market participants had to wait until the release of the minutes, which comes a month or two after the meeting because the board must approve the minutes at the following meeting before its release. The summary is edited by the governor and does not require the board's approval.
