MNI: BOJ Jan Opinions - Members Actively Discuss Exit Policy

Bank of Japan board members actively discussed an exit policy and a post-exit monetary policy at the Jan 22-23 meeting, the summary of opinions released on Wednesday showed.

One BOJ board member said the conditions to terminate the negative interest rate policy are being met. While the other board members did not share the same view, some admitted conditions had elevated the probability of Japan's economy hitting the bank’s 2% price target, leaving the door open for the possible removal of the negative interest rate policy in future.

“There is a growing possibility that wage revisions for this spring will be at relatively higher levels than in the past; in addition, economic activity and prices overall have been on an improving trend,” a member said. “Given these factors, it seems that conditions for policy revision, including the termination of the negative interest rate policy, are being met.”

Another member added, “although achievement of the price stability target of 2% is not yet envisaged with sufficient certainty, it is necessary for the Bank to start discussing the exit from the current monetary policy, since the achievement of the target is becoming more realistic.”

A different member noted, “The Bank has likely entered a phase where it needs to determine the likelihood of achieving the price stability target of 2% in a sustainable and stable manner by examining individual economic indicators.”

The Bank held its policy steady in January. However, MNI has reported it could exit negative rates by April. (See MNI POLICY: BOJ Policymaker Caution Could Impede Board Consensus)

OTHER OPINIONS

• “To achieve the price stability target of 2%, it is necessary that wage growth continue to clearly exceed 2% and that the virtuous cycle between wages and prices intensify further.”
• “In order to proceed deliberately along the path of monetary policy normalisation in response to developments in economic activity and prices, the Bank needs to decide on the termination of the negative interest rate policy at an appropriate timing as a first step toward the normalisation.”
• “A delay in making this decision creates the risk of undermining achievement of the 2% target and of necessitating rapid monetary tightening.”
• “Given the current outlook for economic activity and prices, it is highly likely that accommodative financial conditions will be maintained even if policy actions such as the termination of the negative interest rate policy are implemented.”
• “Regardless of the timing of policy change, the Bank needs to devise both communication and market operations so as not to create discontinuity in the market before and after the change.”