Highlights
Some on the Bank of Japan's nine-member board argued that future interest rate hikes should be conducted at a"moderate" pace and maintain accommodative financial conditions for now to avoid causing stress to the economy while others predicted that the bank may have to raise rates at a"faster" pace than expected by market participants to respond to an upside risk to inflation, according to the summary of the bank's April 25-26 meeting.
In light of the highest pace of wage growth in more than three decades, the bank is now in the process of gradually normalizing the bank's monetary policy after 11 years of aggressive easing has fulfilled its purpose of turning around the stubborn deflation mindset among households and businesses.
"If the outlook for economic activity and prices will be realized and underlying inflation will increase, the bank will adjust the degree of monetary accommodation, while it anticipates that accommodative financial conditions will be maintained for the time being," one member said, echoing recent remarks by Governor Kazuo Ueda.
Another one agreed:"To contain any shocks arising from discontinuous and rapid policy changes when the price stability target is achieved, one option is to adjust the degree of monetary accommodation by conducting moderate policy interest rate hikes, in response to developments in economic activity and prices as well as financial conditions."
There is also a view that the bank must not skip a beat in normalizing super-low interest rates:"In order to adjust the degree of monetary accommodation in a way that does not exert stress on the economy, it will be necessary for the bank to raise the policy interest rate in a timely and appropriate manner as the likelihood of realizing the outlook for economic activity and prices rises."
At the same time, some warned that the bank may have to respond to an upside risk to inflation after maintaining a stimulative policy stance for just over a decade to guide zero inflation to a stable 2 percent. If the price stability target of 2 percent is likely to be achieved in a sustainable and stable manner and the output gap is positive in about two years,"there is a possibility that the future policy interest rate will be higher than the path that is factored in by the market," one member said.
"In the current situation where underlying inflation is below 2 percent, accommodative financial conditions need to be maintained for a fairly long period," another one said."However, if underlying inflation continues to deviate upward from the baseline scenario against the backdrop of a weaker yen, it is quite possible that the pace of monetary policy normalization will increase."
On asset purchases, one member noted that"one option is to reduce the bank's monthly purchase amount of JGBs (Japanese government bonds) -- which is currently about 6 trillion yen per month -- based on the supply and demand balance of JGBs, with the aim of restoring market functioning."
At the April meeting, the board decided in a unanimous vote to hold the overnight interest rate target steady in a range of zero to 0.1 percent, as widely expected, after conducting its first rate hike in 17 years and ending the seven-year-old yield curve control framework in a 7 to 2 vote in March.
In light of the highest pace of wage growth in more than three decades, the bank is now in the process of gradually normalizing the bank's monetary policy after 11 years of aggressive easing has fulfilled its purpose of turning around the stubborn deflation mindset among households and businesses.
"If the outlook for economic activity and prices will be realized and underlying inflation will increase, the bank will adjust the degree of monetary accommodation, while it anticipates that accommodative financial conditions will be maintained for the time being," one member said, echoing recent remarks by Governor Kazuo Ueda.
Another one agreed:"To contain any shocks arising from discontinuous and rapid policy changes when the price stability target is achieved, one option is to adjust the degree of monetary accommodation by conducting moderate policy interest rate hikes, in response to developments in economic activity and prices as well as financial conditions."
There is also a view that the bank must not skip a beat in normalizing super-low interest rates:"In order to adjust the degree of monetary accommodation in a way that does not exert stress on the economy, it will be necessary for the bank to raise the policy interest rate in a timely and appropriate manner as the likelihood of realizing the outlook for economic activity and prices rises."
At the same time, some warned that the bank may have to respond to an upside risk to inflation after maintaining a stimulative policy stance for just over a decade to guide zero inflation to a stable 2 percent. If the price stability target of 2 percent is likely to be achieved in a sustainable and stable manner and the output gap is positive in about two years,"there is a possibility that the future policy interest rate will be higher than the path that is factored in by the market," one member said.
"In the current situation where underlying inflation is below 2 percent, accommodative financial conditions need to be maintained for a fairly long period," another one said."However, if underlying inflation continues to deviate upward from the baseline scenario against the backdrop of a weaker yen, it is quite possible that the pace of monetary policy normalization will increase."
On asset purchases, one member noted that"one option is to reduce the bank's monthly purchase amount of JGBs (Japanese government bonds) -- which is currently about 6 trillion yen per month -- based on the supply and demand balance of JGBs, with the aim of restoring market functioning."
At the April meeting, the board decided in a unanimous vote to hold the overnight interest rate target steady in a range of zero to 0.1 percent, as widely expected, after conducting its first rate hike in 17 years and ending the seven-year-old yield curve control framework in a 7 to 2 vote in March.
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.
