MNI POLICY: BOJ Minutes: Larger Risks; Longer Easing Needed

     TOKYO (MNI) - Bank of Japan board members are concerned at the potential

impact on domestic prices if downside risks to the global economy materialize,

according to the minutes of the central bank's October 30-31 policy-setting

meeting.

     The minutes, released today, showed that the BOJ left policy setting

unchanged because of continued solid domestic demand, which was confirmed

through the September Tankan and its quarterly branch managers' meeting.

     Board members shared the view, however, of the potential impact of global

downside risks.

     "Regarding the outlook for prices, risks to prices were skewed to the

downside, mainly due to the downside risks to economic activity and

uncertainties over developments in medium to long term inflation expectations,"

the minutes said.

     The BOJ's decision to leave policy unchanged saw the bank reject the

opportunity to buy some insurance and take pre-emptive policy action.

     But the BOJ did tweak its forward guidance, indicating that it will

tolerate policy rates moving below the current levels.

     "As for the policy rates, the BOJ expects short- and long-term interest

rates to remain at their present or lower levels as long as it is necessary to

pay close attention to the possibility that the momentum toward achieving the

price stability target will be lost," the BOJ said.

     The previous forward guidance was that the BOJ will maintain the current

easing policy "at least around spring 2020."

     Other key points from the minutes:

     --"The downside risks concerning overseas economies in particular seemed to

be increasing, and if these risks materialized, there was a possibility that

prices also would be affected to some extent."

     --"One member expressed the view that, given that the sentiment of firms,

mainly in the manufacturing sector, and of households had become cautious,

reflecting a heightened of risks regarding economic activity both at home and

abroad as well as of policy uncertainties, there was some possibility that the

momentum toward achieving the price stability target would be lost."

     --One member said, "the inflation momentum was maintained in the sense that

the economy would not fall into deflation but the momentum toward achieving the

price stability target was not maintained."

     --A different member said, "taking into account the current situation in

which downside risks to economic activity and prices were significant, the BOJ

should continue to examine whether additional monetary easing would be

necessary."

     --Many members shared the view, "The BOJ needed to maintain a policy stance

that was titled toward monetary accommodation for a fairly long period of time."

They agreed to revise the forward guidance. 

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI Sydney Bureau; +61 405322399; email: lachlan.colquhoun.ext@marketnews.com

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