MNI BRIEF: BOJ Minutes Show Some Worry Over Weak Yen Impact

Some Bank of Japan board members voiced concern over the impact of the weak yen on households at the September 21-22 policy-setting meeting, the minutes released on Wednesday showed.

However, the board members agreed the BOJ needed to maintain easy policy to achieve its 2% inflation target and that it should not target foreign exchange rates.

“Some members noted that the yen's depreciation tends to lead to deterioration in profits of nonmanufacturing firms as well as small and medium-sized ones that relied primarily on domestic demand, although the degree of its impact could differ depending on attributes of each firm, such as whether it was an exporting or importing firm, and that such depreciation could also be a factor to push down households' real income,” the minutes showed.

The minutes also noted: “A few members said that the keys to augmenting the advantages of the yen's depreciation were, for example, an expansion in inbound tourism consumption, a rise in business fixed investment, an increased emphasis on domestic sites in investment for growth areas, enhancement of small and medium-sized firms' export capacity, and wage increases.”

The Japanese yen fell to a 32-year low of around JPY152 against the U.S. dollar in October, with the Ministry of Finance data showing the government and Bank of Japan bought JPY6.35 trillion between Sep 29 and Oct 27 to support the currency. (See MNI BRIEF: BOJ, Govt Bought JPY6.35 Trln in Oct Intervention)

The Bank of Japan maintained it policy rates and easing guidance at its Oct 27-28 meeting. (See MNI BOJ WATCH: Closer To 2% Target, But Easy Policy Remains)