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Free AccessMNI POLICY: BOJ June Minutes: CPI To Rise But Outlook Cautious
TOKYO (MNI) - Many of the Bank of Japan's nine policy board members
believed the overall economic recovery should lead consumer prices higher toward
the bank's 2% inflation target, but some members remained cautious in the face
of the stubborn deflationary mindset and slow wage growth, the minutes of the
June 14-15 meeting released Friday showed.
At the June meeting, the 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 2016, while projecting the moderate economic recovery will
continue despite some soft spots.
--DEFLATIONARY MINDSET
Some members blamed "short-term factors," such as the yen's appreciation
through early spring (lowering import costs) and price declines in some CPI
items with large fluctuations, for the sluggish growth in the CPI since the
start of fiscal 2018.
They also noted stiff competition among retailers -- mainly due to
consumers' preference for lower prices of goods and services -- had discouraged
firms from raising prices at the start of the fiscal year on April 1.
From a long-term perspective, some members said, the weak price
developments were due to the fact that "the mindset and behavior based on the
assumption that wages and prices would not increase easily had been deeply
entrenched among firms and households."
--COST-PUSH INFLATION
But many members said the improvement in the output gap continued to exert
upward pressure on wages and prices.
For example, some members added that passing of the rise in labor costs on
to sales prices by firms had been partly observed, mainly in the services
sector, and prices mainly of dining-out and delivery services had been seeing a
steady acceleration in their year-on-year rates of increase.
--SLOW WAGE GROWTH
Some members pointed out that it was a positive development that wages of
non-regular employees kept rising "noticeably" amid the continued tightening of
labor market conditions.
But one member said the pace of wage increases likely would persist because
the rate of base pay increase resulting from this spring's annual
labor-management wage negotiations was "only slightly higher" than that of last
year.
A different member noted that there was a labor surplus in industries and
types of jobs with high wage levels while labor shortage was becoming more acute
in those with low wage levels. This might be "constraining upward pressure on
overall wages."
Looking ahead, members shared the view that employee income was likely to
continue to "increase steadily" as labor market conditions kept tightening and
corporate profits improved.
--MODERATE SPENDING GROWTH
One member said that, in order to stimulate household consumption, it was
important to raise wages to a level that outpaced inflation by lifting labor
productivity.
Members concurred that private consumption was likely to "follow a moderate
increasing trend," supported by an increase in employee income and the wealth
effects stemming from the past rise in stock prices, as well as by replacement
demand for durable goods.
One member said that the rise in nominal wages -- albeit at a moderate pace
-- was likely to positively influence the underlying trend in private
consumption, but the outlook for private consumption "could not be viewed
optimistically" as the sales tax hike was scheduled for fiscal 2019.
--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com
[TOPICS: MAJDS$,MMJBJ$,M$A$$$,M$J$$$]
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.