MNI: BOJ Jan Ops: Many Urged Continued Easing; Some Cautious

     TOKYO (MNI) - Many Bank of Japan board members argued that the BOJ must

maintain its large-scale monetary easing program as it is far from achieving its

2% inflation target, the summary of opinions at the bank's Jan. 22-23 policy

meeting released Wednesday showed.

     The BOJ needs to persistently continue monetary easing because it takes

"considerable time" before inflation expectations rise and support the path

toward a stable 2% annual inflation rate, one member said.

     However, another member urged the BOJ to keep a close eye on both

stimulative effects and side-effects of the bank's massive purchase of ETFs

(exchange-traded funds).

     In addition, at least two of the nine BOJ board members said the BOJ may

have to consider "adjusting" monetary policy in the future.

     The same number board members referred to the need for eventual unwinding

of aggressive monetary easing based on massive asset purchases and super-low

interest rates.

     On the need to continue easing, one member said, "The year-on-year rate of

increase in the CPI excluding fresh food has been accelerating. However, as it

has continued to show relatively weak developments excluding the effects of a

rise in energy prices, it is necessary to pursue the current powerful monetary

easing with persistence."

     A different member agreed, "As there is still a long way to go to achieve

the price stability target of 2%, it is appropriate to maintain the current

monetary policy."

     Japan's core CPI (excluding fresh food) rose 0.9% on year in December,

unchanged from +0.9% in November. The core-core CPI (excluding fresh food and

energy) rose just 0.3% on year in December, also unchanged from +0.3% in

November.

     There is also a cautious view: "Although the environment surrounding prices

is considered to have improved slightly, firms' actions to raise prices have

remained limited. Therefore, it is judged as necessary to persistently conduct

monetary policy so that highly accommodative financial conditions are

maintained."

     A different member also said, "Given the tenacious deflationary mindset, it

may take considerable time to raise inflation expectations through the adaptive

formation mechanism. It is necessary to continue to pursue powerful monetary

easing with persistence, thereby supporting in a sustainable manner the positive

price developments that have started to be observed."

     Among the voices calling for the need to consider reducing the degree of

easing in the future, one member said, "Amid the situation of the inflation rate

increasing toward 2% and the economy's medium- to long-term growth potential

rising going forward, the effects of monetary easing measures will be enhanced."

     The same member also said, "While taking into account such changes in the

environment as well as the side effects of the measures, it also may be

necessary to consider what the desirable policy conduct would be going forward."

     A different member said, "When it is expected that economic activity and

prices will continue to improve going forward, the situation may occur where the

BOJ will need to consider adjustment of the level of interest rates under the

framework of quantitative and qualitative monetary easing with yield curve

control, including from the perspective of strengthening the sustainability of

the framework."

     On the scale of massive asset purchases by the central bank, one said,

"With regard to the purchases of risky assets including exchange-traded funds

(ETFs), given that stock prices and corporate profits have substantially

improved and are expected to continue to develop firmly going forward, their

policy effects and the possible side effects should be examined from every

angle."

     At the January meeting, the BOJ board decided in an 8-to-1 vote to maintain

its current monetary easing stance under the yield curve control framework it

adopted in September in 2016.

     Under the yield curve control framework, the BOJ is seeking to stabilize

the 10-year government bond yield, the benchmark for long-term borrowing costs,

at around zero percent and keep the overnight interest rate at -0.1%.

     The BOJ board also maintained its medium-term growth and inflation

projections, repeating what many see as an optimistic outlook that the bank can

hit the inflation target "around fiscal 2019."

--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

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