BOJ July Opinions: Prices Weak But No Need To Ease More

     TOKYO (MNI) - The Bank of Japan's policy-making board believes that because

the pickup in consumer prices has been slow due to uncertain growth prospects

and sluggish consumption, a continuation of the current monetary easing policy

is needed, according to the summary of opinions at the board's July 19-20

meeting released Friday.

     Some members said there was no need to expand the scope of already

extensive monetary stimulus as the economy's modest recovery has continued

despite weak prices.

     "The year-on-year rate of change in the CPI (all items less fresh food) is

likely to increase gradually toward 2%," one member said. "However, it is

anticipated that it will take longer than expected to reach 2%, as developments,

such as those in commodity prices and inflation expectations, have not been

sufficiently firm while the output gap has been positive."

     Another member stated, "Room for a further increase in labor productivity

in the services sector remains large, and there is some way to go before the

tightening of labor markets leads to rises in wages and prices."

     A different member said, "In order to achieve the price stability target of

2%, it is necessary to improve the output gap through an expansion of

consumption and make firms' price-setting stance bullish."

     On monetary policy, one member said, "Although the CPI projections have

been lowered, the momentum toward achieving 2% is firmly maintained at this

point. Thus, additional monetary easing is not necessary and the BOJ should

maintain the current policy."

     Another member said that the recent price developments had been sluggish

but that "the improving trend in economic activity has strengthened and the

momentum toward achieving the price stability target has been maintained.

Therefore, it is important to maintain the current monetary policy framework and

carefully monitor its effects."

     At its July meeting, the BOJ board decided to leave its monetary policy

unchanged in a seven-to-two vote, retaining the yield curve control target it

adopted in September last year, while pushing back its estimate for achieving

its 2% inflation target by a year until "around fiscal 2019."

     In its quarterly Outlook Report released after the meeting, the BOJ board

again revised up slightly its economic growth forecast for the next two years on

firmer global demand but revised down its projection for inflation through

fiscal 2019 as the pace of increases in wages and retail prices remains slow.

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--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com

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