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The Bank of Japan board see the JGB curve as having formed smoothly in line with the guideline for market operations at the late October policy meeting, the minutes released Wednesday showed.

However, there was some moderate dissent, with one member saying the bank should consider a steepening of the longer-end while maintaining 10-year rates at zero, helping the profitability of financial institutions.

The bank left monetary policy unchanged in October, seeing the recently introduced lending programs to facilitate financing for smaller firms' working smoothly, with bank lending growing. Since then, the board decided at the December meet that it will conduct an assessment for further effective and sustainable monetary easing as it is still taking time to hit the 2% price target.

But the BOJ said that the bank sees no need to change the current policy framework and it will assess various measures conducted under the frame and make public its finding, likely at the March 18-19 meeting 2021.


On inflation, one member said the Covid fallout could see CPI "stay in negative territory for a protracted period and deflation might take hold; thus, this possibility warranted attention in conducting monetary policy."

"A few members pointed out that careful attention should be paid to developments in prices and inflation expectations given, for example, that a decline in actual prices could affect people's perception of prices under the adaptive formation mechanism of inflation expectations, which was persistent in Japan," the minutes added


There was agreement that a coordinated approach to policy was needed to deal with the Covid-19 fallout, with one board member saying "further coordination of fiscal and monetary policy was necessary and it was appropriate for the BOJ to revise the forward guidance for the policy rates to relate it to the price stability target, with a view to not allowing deflation to take hold as well as committing itself to conducting monetary policy based on concrete conditions."

Another said, "it was worthwhile to firmly support corporate financing, but attention should be paid to the possibility that the more prolonged the crisis response, the more the structural reforms toward sustainable growth would be delayed."

Another member said that, "in order to encourage firms' efforts toward creating value-added, it was important to support establishing a system in which more investment funds for growth would be provided to firms, including financing for mergers and acquisitions and new issuance of bonds by non-investment-grade firms."