— Adds Details, Background From 7th Paragraph
TOKYO (MNI) – Some Bank of Japan board members cautioned that the
BOJ’s stimulus measure of increasing financial asset buying could lead
to the public notion that it is financing government spending, the
minutes of the bank’s April 27 policy meeting released Monday showed.
“A few members added that, considering that the amount of the BOJ’s
JGB purchases was becoming significantly large in scale, due attention
should be paid to preventing the BOJ’s powerful monetary easing from
being misunderstood as monetization,” the minutes said.
“On this point, members shared the view that, given that the BOJ
was pursuing powerful monetary easing in a severe fiscal situation, it
was extremely important that the credibility of fiscal sustainability in
financial markets be maintained to ensure the stimulative effects of
monetary policy, as well as maintain the stability of the financial
system and achieve sustainable economic growth.”
At the April 27 meeting, the BOJ’s policy board decided to expand
its financial asset-buying program to about Y70 trillion from Y65
trillion, as widely expected, by raising purchases of long-term Japanese
government bonds to Y29 trillion from Y19 trillion and reducing
six-month market operations.
As for outright JGB buying, the BOJ decided to extend maturities of
JGBs that it is buying under the temporary asset-buying program to one
to three years from one to two years.
The board also voted unanimously to continue the bank’s practically
zero interest rate policy, vowing to guide the economy toward a more
sustainable recovery track.
The board agreed that “it was appropriate to examine the BOJ’s
purchase of risk assets, taking into consideration developments in
markets for financial assets, the room left for its additional purchases
of these assets (corporate bonds and commercial paper), and issues with
response to its financial soundness,” the minutes said.
“Some members, referring to varied market speculation about the
BOJ’s conduct of monetary policy, said that monetary policy should be
conducted in light of its objective to achieve sustainable economic
growth with price stability.”
“Members made note of some misunderstanding that the BOJ would
continue to increase the size of its (Asset-Buying) Program in an
automatic manner until it judged the 1% goal in terms of the
year-on-year rate of increase in the CPI to be in sight,” the minutes
showed.
After the April 27 meeting, the BOJ said it will likely be not too
long before the rate reaches the bank’s longer-term price stability goal
of 1% annual inflation.
With regard to risk factors, the minutes said, “A few members said
that it was necessary to pay due attention to the possibility that
production would be restrained by electricity supply in summer 2012.”
Since the Fukushima meltdown, Japanese utilities have been
importing more oil and gas to make up for the loss of electricity
generation from nuclear power. All of Japan’s 50 reactors have been shut
for routine safety inspections and municipalities are opposed to
restarting them.
“As for developments in import prices, a few members said that a
rise in wages in China could exert upward pressure on prices in Japan
through a rise in import prices,” according to the minutes.
“Members concurred that, although downside risks to the Chinese
economy were drawing attention, the growth rates of these (emerging and
commodity-exporting) economies as a whole would increase again, mainly
due to a recovery in households’ real purchasing power following the
decline in inflation rates and the spread of monetary easing effects.”
But the minutes also said, “One member said that it was necessary
to closely monitor whether signs of weakness observed recently (in
China) were temporary.”
“Members shared the view on the outlook that economic activity in
the euro area would continue to be quite sluggish for the time being
against the background of continuing fiscal austerity and financial
institutions’ reduction of their assets,” the minutes said.
The board warned that “it was possible that strains in global
financial markets would intensify once again and be accompanied by a
fall in stock prices and appreciation of the yen, thereby exerting
downward pressure on the global economy and consequently Japan’s
economy.”
tokyo@marketnews.com
** MNI Tokyo Newsroom: 81-3-5403-4833 **
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