Highlights
Some Bank of Japan board members predicted that wages may see a sustained hike in the next fiscal year starting in April, supporting a path toward stable 2 percent inflation, but others pointed out that the recent surge in consumer prices is largely due to higher import and energy costs amid the weak yen, according to the summary of opinions expressed at the bank's Sept. 21-22 meeting released Monday.
Noting uncertainty over the inflation outlook, board members agreed that the bank should continue with easing patiently to support wage increases, calling for flexible conduct of monetary policy, but also noted the need to continue debating the costs and benefits of the yield curve control framework.
At the September meeting, the BoJ policy board decided unanimously to maintain its monetary easing stance, keeping its zero to slightly negative interest rate targets along the yield curve as well as large asset purchases to continue seeking stable 2 percent inflation and support sustainable wage growth.
Governor Kazuo Ueda told a post-meeting news conference on Sept. 22 that the bank's policymakers"cannot possibly pre-determine the timing of policy change or specific responses," reminding that it may take some more time before clear indications for continued substantial wage hikes and stable 2 percent inflation emerge. He repeated that Japan's growth and inflation outlook remains highly uncertain.
Ueda also said the risk of under-easing is still greater than over-easing because Japan has experienced years of deflation and low inflation.
At its previous meeting in July, the board decided in an eight to one vote to make the bank's existing reference range for the 10-year bond yield more flexible, basically keeping the range of minus 0.5 percent to plus 0.5 percent, but expanded its ultimate defense lines to minus 1.0 percent and plus 1.0 percent in market operations. The July vote on the overall easing stance was unanimous.
By providing"greater flexibility" to its market operations, the bank hopes to avoid being forced to abandon the yield curve control policy framework when long-term interest rates come under persistent upward pressures. It also hopes to allow a natural uptick in long-term interest rates that reflects economic recovery with substantial wage hikes and mitigate the negative impact of artificially suppressing interest rates, which has paralyzed bond market functions and could negatively affect other financial markets.
The board remains cautious about making a fundamental change to the yield curve control framework, which was adopted in September 2016. A negative interest rate for the overnight rate was introduced in January that year.
Under the current framework, the BoJ is keeping the 10-year government bond yield, the benchmark for long-term borrowing costs, at around zero percent by buying"a necessary amount" of Japanese government bonds"without setting an upper limit," and to keep the overnight interest rate at minus 0.1 percent by charging 0.1 percent interest on a part of cash reserves parked at the bank by financial institutions.
Noting uncertainty over the inflation outlook, board members agreed that the bank should continue with easing patiently to support wage increases, calling for flexible conduct of monetary policy, but also noted the need to continue debating the costs and benefits of the yield curve control framework.
At the September meeting, the BoJ policy board decided unanimously to maintain its monetary easing stance, keeping its zero to slightly negative interest rate targets along the yield curve as well as large asset purchases to continue seeking stable 2 percent inflation and support sustainable wage growth.
Governor Kazuo Ueda told a post-meeting news conference on Sept. 22 that the bank's policymakers"cannot possibly pre-determine the timing of policy change or specific responses," reminding that it may take some more time before clear indications for continued substantial wage hikes and stable 2 percent inflation emerge. He repeated that Japan's growth and inflation outlook remains highly uncertain.
Ueda also said the risk of under-easing is still greater than over-easing because Japan has experienced years of deflation and low inflation.
At its previous meeting in July, the board decided in an eight to one vote to make the bank's existing reference range for the 10-year bond yield more flexible, basically keeping the range of minus 0.5 percent to plus 0.5 percent, but expanded its ultimate defense lines to minus 1.0 percent and plus 1.0 percent in market operations. The July vote on the overall easing stance was unanimous.
By providing"greater flexibility" to its market operations, the bank hopes to avoid being forced to abandon the yield curve control policy framework when long-term interest rates come under persistent upward pressures. It also hopes to allow a natural uptick in long-term interest rates that reflects economic recovery with substantial wage hikes and mitigate the negative impact of artificially suppressing interest rates, which has paralyzed bond market functions and could negatively affect other financial markets.
The board remains cautious about making a fundamental change to the yield curve control framework, which was adopted in September 2016. A negative interest rate for the overnight rate was introduced in January that year.
Under the current framework, the BoJ is keeping the 10-year government bond yield, the benchmark for long-term borrowing costs, at around zero percent by buying"a necessary amount" of Japanese government bonds"without setting an upper limit," and to keep the overnight interest rate at minus 0.1 percent by charging 0.1 percent interest on a part of cash reserves parked at the bank by financial institutions.
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.
