*
BOJ must avoid being behind the curve - April meeting
*
Some board members saw signs of progress in wage growth
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Board debated YCC side-effect, impact of future rate hike
(Adds policymaker quotes, background on Japan's inflation
throughout)
By Leika Kihara
May 11 (Reuters) - Bank of Japan policymakers debated
the country's progress towards achieving their inflation target
and the pace at which they could roll back stimulus at new
governor Kazuo Ueda's debut meeting in April, a summary of
opinions at the meeting showed.
Some in the board also flagged the side-effects of the BOJ's
bond yield control and possible repercussions in case it raises
interest rates in the future, the summary showed on Thursday, a
sign the central bank was becoming more open to the idea of a
future policy shift.
"Japan's economy is showing signs of achieving a positive
cycle of (rising) wages and inflation. The BOJ needs to judge
the trend accurately, so its policy response doesn't end up
being behind the curve," one opinion showed.
"I'll be closely watching the results of upcoming BOJ
bond market surveys as I feel yield curve control is disrupting
smooth market function," another opinion showed.
At Ueda's debut meeting in April, the BOJ kept ultra-low
interest rates but announced a plan to review its past monetary
policy moves. It also removed guidance pledging to keep interest
rates at "current or lower levels" in a move that gives the BOJ
more flexibility in raising interest rates.
With inflation exceeding the BOJ's target for a year,
markets have been rife with speculation Ueda will soon phase out
his predecessor's massive stimulus that has drawn public
criticism for distorting market pricing and crushing bank
profits.
While many board members saw the need to keep monetary
policy ultra-loose for the time being, some saw growing signs of
progress towards sustainably achieving 2% inflation.
"With labour shortages intensifying, wage growth will
remain strong next year," one opinion said, a view echoed by
another member who expected inflation to remain high for the
time being.
"Achievement of the 2% inflation target is coming into
sight. But it's appropriate to maintain easy monetary policy for
the time being due to risks both on the upside and downside," a
third opinion showed.
Under yield curve control (YCC), the BOJ sets a short-term
interest rate target of -0.1% and caps the 10-year bond yield
around zero as part of efforts to reflate the economy and
sustainably achieve its 2% inflation target.
Japan's core consumer inflation hit 3.1% in March and an
index excluding fuel costs rose at the fastest annual pace in
four decades in a sign of broadening price pressure.
(Reporting by Leika Kihara; Editing by Sandra Maler, Shri
Navaratnam and Sonali Paul)
