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The Bank of Japan should examine the positive side effects of monetary easing measures, including asset purchases, and enhance their sustainability and effectiveness as necessary, according to one board member quoted in the summary of opinions from the December 17-18 meeting released Monday.
The summary reveals that another board member said that "active purchases" of exchange-traded funds (ETFs) should be maintained "for the time being".
"In addition, under prolonged monetary easing, the Bank should seek room to make flexible adjustments depending on market conditions while taking into consideration the Bank's financial soundness," the board member said.
At the meeting, the BOJ left monetary policy unchanged but decided to extend the lending facility to support corporate financing to September 30, 2021, from March 31, 2021.
The board also decided to conduct an assessment of monetary policy measures as it seeks time to achieve the 2% price target.
Other key points from the summary of opinions from BOJ board members:
"It is necessary for the BOJ to enhance sustainability of yield curve control and purchases of assets, such as ETFs, through the flexible conduct and be prepared so that it can respond effectively to possible changes in economic activity and prices as well as financial conditions."
"Considering that containment of the spread of Covid-19 and improvement in economic activity should be achieved simultaneously during the Covid-19 era, it is necessary for the Bank to deeply discuss how to achieve the price stability target of 2%."
"It is necessary to reexamine from various aspects what kind of strategies the BOJ should take toward achieving the price stability target."
"It is important to develop and enhance direct financing through, for example, creating a deep corporate bond market so that funds for growth will be provided to firms. The Bank should encourage their activities toward sustainable growth."
FURTHER DOWNWARD PRESSURE
One member said, "Japan's economy has picked up, although it has remained in a severe situation. That said, there is a risk that the pace of economic recovery will be pushed down further, mainly due to the impact of the spread of Covid-19."
In the view of another member: "Due to the recent spread of Covid-19, uncertainties over the outlook are increasing, mainly for the face-to-face services industry, and thus it is necessary to carefully examine future developments."
Another member said, "Adjustment pressure on business fixed investment and employment is likely to remain in Japan. In this situation, there is a risk that the resurgence of Covid-19 at home and abroad will lead to an economic downturn through the tightening of public health measures and deterioration in households' sentiment, and thus this risk warrants attention."
One member said, "At present, the economy is not judged to have fallen into a deflationary situation again, but it is quite difficult to hold an optimistic view on whether firms' and households' perception of prices will improve."
Another member said, "The year-on-year rate of change in the observed prices has turned negative due to temporary factors, and there is still, to a certain extent, a risk of the economy falling into deflation again as medium-to long-term inflation expectations have weakened somewhat. Risks of sudden changes in financial markets, including foreign exchange rates, also continue to warrant attention."