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Some BOJ Board Members Urged Scrutiny On Cost Of Easing: January Minutes

Kitco News

Leika Kihara

TOKYO (Reuters) - Some Bank of Japan policymakers called for greater scrutiny on the potential drawbacks of massive monetary stimulus and signaled the possibility of a future interest rate hike, minutes of their January meeting showed on Wednesday.

The BOJ kept monetary settings unchanged at the meeting and most board members shared the view the bank must “persistently” pursue powerful easing, the minutes showed.

But some members said the central bank must be mindful of the potential side-effects of its policy, such as the damage years of near-zero interest rates is inflicting on financial institutions’ profits, according to the minutes.

“Some members said it was important to continue to monitor and assess the positive impacts and side-effects of the current monetary easing policy, including its effects on Japan’s banking system,” the minutes showed.

One member said the BOJ would need to consider raising its yield target if economic and price conditions continue to improve, according to the minutes, adding that such a step would make the central bank’s policy framework more sustainable.

Another member, however, called for ramping up stimulus given subdued inflation, highlighting the rift within the BOJ’s nine-member board on the future policy direction.

After years of heavy asset buying failed to fire up inflation to its 2 percent target, the BOJ revamped its policy framework in 2016 to one targeting interest rates from the pace of money printing.

With inflation barely above 1 percent, BOJ Governor Haruhiko Kuroda has repeatedly said the bank was in no rush to dial back stimulus even as the costs of prolonged easing mount.

Some board members are more worried about the cost of easing than others. Hitoshi Suzuki, a former commercial banker, said in February the BOJ could raise rates or slow the purchase of risky assets if the costs of prolonged easing began to outweigh the benefits.

Another board member Goushi Kataoka, however, has called for expanding monetary stimulus, saying it was needed to ensure inflation hits the BOJ’s 2 percent target.

At its most recent policy meeting on Friday, the BOJ held settings but Kuroda signaled his readiness to ramp up stimulus if the economic recovery lost steam, an emphatic pushback against creeping speculation it could tighten the money spigot.

Reporting by Leika Kihara; Editing by Chang-Ran Kim and Sam Holmes

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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