MNI POLICY: BOJ Sep Minutes: Need of Reviewing Policy Strategy

A number of Bank of Japan board members saw the need to review the central bank's policy strategy and framework amid the prolonged coronavirus disruptions at the September 16-17 meeting, the minutes released Wednesday showed.

However, the policymakers did not see an imminent need to review the current monetary policy.

One member said, "It would be necessary to reconsider the strategy towards achieving the price stability target comprehensively, given that the path toward achieving the target was not in sight amid the situation of significant changes in economic development."

Another member said that the BOJ should maintain the 2% price target but "it was important to ensure the sustainability of the policy, including addressing its side effects, given that monetary easing was expected to become prolonged."

At the meeting, the BOJ left monetary policy unchanged, as widely
expected, and saw the recently introduced lending programs designed to facilitate
financing for smaller firms' working smoothly, with bank lending growing.

QUOTES FROM THE MINUTES

--POLICY TOP PRIORITY

"The priority for monetary policy for the time being was to endeavor to support corporate financing and sustain employment."

"The BOJ should maintain the current stance of monetary policy and carefully examine the positive effects and side effects."

"Some members expressed the recognition that it was necessary for the BOJ to continue to closely cooperate with the government based on their respective roles."

--FINANCIAL MARKET CONCERN

"If the economic recovery was delayed, this could cause an increase in firms' credit costs and a deterioration in the functioning of financial intermediation, which in turn might bring about a rise in bankruptcies of firms and a deterioration in the employment situation."

--DOWNSIDE RISKS

"Some members expressed the view that careful monitoring was required of downside risks, particularly the impact of Covid-19."

"It was necessary to carefully examine the second-round effects—such as how households' and firms' mindset and behavior, firms' price-setting behavior, or the formation of inflation expectations would change due to the impact of Covid-19."