Highlights
Bank of Japan board members noted that high costs of living are hurting consumer spending but they appeared to be divided over how to proceed with a further rate hike as part of its policy normalization, with one member calling for an early action while others urging a more cautious approach, according to the summary of the bank's June 13-14 meeting.
One of the nine members said that"upside risks to prices have become more noticeable" and that those risks"have affected consumer sentiment." Ahead of the next meeting, the member urged the board to monitor data closely and"raise the policy interest rate not too late" as the likelihood of achieving the 2 percent price stability target increases.
But there was a more cautious voice."Any change in the policy interest rate should be considered only after economic indicators confirm that, for example, the CPI inflation rate has clearly started to rebound and medium- to long-term inflation expectations have risen," another member said.
A third member pointed to downside risks to growth, saying that private consumption lacks momentum and there have been successive unexpected suspensions of shipment at some automakers over safety concerns."As the bank needs to assess the effects of these factors, it is appropriate that it continue with the current monetary easing for the time being."
On the impact of the weak yen, one member said it could increase the upside risk to the bank's inflation outlook, and in this context,"the risk-neutral level of the policy interest rate should rise."
Another member reminded that monetary policy is conducted based on an assessment of the trend in prices and underlying wage developments."It is not determined by short-term developments in foreign exchange rates," the member said.
On how the bank should trim its large financial asset holdings, one member called for a"gradual" approach, warning that a reduction in the pace of the bank's purchases of Japanese government bonds"could push down the economy, depending on the timing of the start and the scale of the reduction."
Another member noted that reducing the bank's balance sheet"is to reduce its increased involvement in the market without exerting disturbing effects on it, and this should be conducted separately from monetary policy."
Governor Kazuo Ueda told a post-meeting news conference on June 14 that the bank"will not use" the reduction as an"active" monetary policy adjustment tool."Monetary policy adjustment will be done mainly through short-term interest rates," he said.
At its June meeting, the nine-member board decided in a unanimous vote to hold the overnight interest rate target steady in a range of zero to 0.1 percent for the second straight meeting after conducting its first rate hike in 17 years and ending the seven-year-old yield curve control framework in March.
The board also decided in an 8 to 1 vote to set the stage for gradually reducing the bank's large holdings of various financial assets for the next year or two years"to ensure long-term interest rates would be formed more freely in financial markets." It will work out a specific plan at its July 30-31 meeting after bank officials have compared notes with market participants.
One of the nine members said that"upside risks to prices have become more noticeable" and that those risks"have affected consumer sentiment." Ahead of the next meeting, the member urged the board to monitor data closely and"raise the policy interest rate not too late" as the likelihood of achieving the 2 percent price stability target increases.
But there was a more cautious voice."Any change in the policy interest rate should be considered only after economic indicators confirm that, for example, the CPI inflation rate has clearly started to rebound and medium- to long-term inflation expectations have risen," another member said.
A third member pointed to downside risks to growth, saying that private consumption lacks momentum and there have been successive unexpected suspensions of shipment at some automakers over safety concerns."As the bank needs to assess the effects of these factors, it is appropriate that it continue with the current monetary easing for the time being."
On the impact of the weak yen, one member said it could increase the upside risk to the bank's inflation outlook, and in this context,"the risk-neutral level of the policy interest rate should rise."
Another member reminded that monetary policy is conducted based on an assessment of the trend in prices and underlying wage developments."It is not determined by short-term developments in foreign exchange rates," the member said.
On how the bank should trim its large financial asset holdings, one member called for a"gradual" approach, warning that a reduction in the pace of the bank's purchases of Japanese government bonds"could push down the economy, depending on the timing of the start and the scale of the reduction."
Another member noted that reducing the bank's balance sheet"is to reduce its increased involvement in the market without exerting disturbing effects on it, and this should be conducted separately from monetary policy."
Governor Kazuo Ueda told a post-meeting news conference on June 14 that the bank"will not use" the reduction as an"active" monetary policy adjustment tool."Monetary policy adjustment will be done mainly through short-term interest rates," he said.
At its June meeting, the nine-member board decided in a unanimous vote to hold the overnight interest rate target steady in a range of zero to 0.1 percent for the second straight meeting after conducting its first rate hike in 17 years and ending the seven-year-old yield curve control framework in March.
The board also decided in an 8 to 1 vote to set the stage for gradually reducing the bank's large holdings of various financial assets for the next year or two years"to ensure long-term interest rates would be formed more freely in financial markets." It will work out a specific plan at its July 30-31 meeting after bank officials have compared notes with market participants.
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.
