MNI BRIEF: BOJ Opinions Back Easing Guidance Despite Weak Yen

At least two Bank of Japan board members said the Bank needed to maintain an easing bias in its forward guidance for policy rates despite a weak yen at the September 21-22 meeting, the summary of opinions released on Monday showed.

“Although other risks, such as a slowdown in overseas economies, certainly affect policy decisions, COVID-19 has remained a significant risk, and thus there is no need to change the current wording of forward guidance,” one member said.

A different member said: “Given that the course of COVID-19 is still uncertain and that the inflation rate is highly likely to decelerate from fiscal 2023, it is desirable to maintain the easing bias in the current forward guidance.”

Despite the continued weakness in the yen, the board saw the need to maintain easy policy at the meeting.

“In the conduct of monetary policy, foreign exchange rates are not subject to direct control. The Bank should carefully explain that it needs to continue with monetary easing to achieve the price stability target in a stable manner,” one member said.

Another member said: “It has been pointed out in the market that further depreciation of the yen is partly due to differences in the direction of monetary policy between Japan and other economies. Since the impact of the yen's depreciation differs among economic entities, the Bank needs to carefully explain the significance of continuing with the current monetary easing.”