MNI: FX Moves May Warrant Policy Action - BOJ Minutes

Some Bank of Japan board members saw the possibility that developments of foreign exchange rates could warrant monetary policy action at the April 25-26 policy meeting, despite forex rates not subject to direct control by monetary policy, the meeting minutes showed on Wednesday.

“One of these members commented that, given factors such as the trilemma of international finance monetary policy should not be employed to achieve stability in foreign exchange rates,” the minutes showed.

The same member continued, however, that, if movements in foreign exchange rates had an impact on firms' medium- to long-term inflation expectations and corporate behaviour, this would raise the risk of prices being affected, thereby making a monetary-policy response necessary.

“Many members pointed out that the Bank would adjust the degree of monetary accommodation as underlying inflation rose, but that, given the outlook for economic activity and prices, accommodative financial conditions would be maintained for the time being,” the minutes also showed.

“One member expressed the recognition that it was necessary to deepen discussion on the timing and degree of policy interest rate hikes,” the minutes stated.

Another member said that the pace of adjusting the degree of monetary accommodation would change depending on the likelihood of realising the outlook for economic activity and prices, the minutes showed.

The BOJ board held its policy rate steady last week and noted a decision on its JGB buying would occur at the July meeting. (See MNI BOJ WATCH: Cuts To Bond Buys Detailed In July, Hike Eyed)