MNI: Upside Risks To Prices Tolerable - BOJ Minutes

Upside risk to prices is concerning despite its small risk, some Bank of Japan board members noted at the March 18-19 meeting which saw the end of the Bank's negative rate and yield curve control, the minutes showed Thursday.

One member noted the BOJ will handle upside risk to prices through the new flexible policy framework. “Some members pointed out that prices could rise more than expected, mainly due to discontinuous changes in expectations of economic entities, although this was not a significant risk at this point,” the minutes showed. “One of these members said that, even if such risk materialised, the changes in the monetary policy framework would make it easier for the Bank to make more flexible responses.”

A separate member added the Bank should proceed deliberately but steadily with monetary policy normalisation in response to developments in economic activity and prices.

Another member said it is important to clearly communicate through the use of various methods that the changes in the monetary policy did not represent a regime shift toward monetary tightening, but rather a part of efforts to achieve the price stability target.

As for JGB buying, some members expressed the view that it was desirable for the Bank to reduce the amount of JGB purchases "at some point in the future, and also reduce the amount outstanding of its JGB holdings through redemptions of JGBs."

The Board last week held its policy steady and left its bond buying programme at JPY6 trillion. (See MNI BOJ WATCH: Ueda Flags Policy Change On Weak Yen-Led Inflation)