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--New Board Member Says Current Policy Not Sufficient To Reach 2% CPI
TOKYO (MNI) - The Bank of Japan board decided Thursday in an 8-to1 vote to
maintain its current monetary easing stance under the yield curve control
framework it adopted about a year ago.
One of the two new board members, Goushi Kataoka, dissented, arguing
current policy was insufficient to meet the central bank's 2% policy goal by the
current target date of sometime in fiscal 2019, according to the BOJ's policy
statement following its meeting.
Kataoka was quoted as citing "an excess supply capacity in capital stock
and the labor market" as the reason for his objection but the statement didn't
show any counter-proposals made by him.
In July, the BOJ pushed back the timeframe for hitting the 2% inflation
target to "around fiscal 2019" from the previous estimate of "around fiscal
2018." It was the sixth delay since the bank began aggressive easing in April
Kataoka also opposed the description of the board's inflation outlook.
Although the year-on-year rate of change in the CPI is likely to increase
for the time being, reflecting developments in crude oil prices and foreign
exchange rates, the possibility of the rate of change increasing toward 2% "from
2018 onward" is low at this point, Kataoka told the board.
Kataoka, a former economist at Mitsubishi UFJ Research and Consulting, and
Hitoshi Suzuki, who was an executive at the Bank of Tokyo-Mitsubishi UFJ,
officially joined the BOJ board on July 24 but participated in their first
policy meeting this week.
The two replaced skeptics of the aggressive easing that has lasted for more
than four years -- Takahide Kiuchi and Takehiro Sato -- who continued to warn
side-effects of the easing until they left the BOJ on July 23 at the end of
their five-year terms.
BOJ Governor Haruhiko Kuroda will hold a news conference at 1530 JST (0630
GMT) to discuss the board's decision.
The board decided to keep the policy targets of guiding the overnight
interest rate at -0.1% and the 10-year bond yield around zero percent.
The BOJ's asset purchases, which are no longer the main policy target, will
be maintained at the current pace. The outstanding amount of its JGB holdings
will increase about Y80 trillion annually, the BOJ repeated, though recent
purchases have been well below that rate.
The BOJ repeated it would "make policy adjustments as appropriate, taking
account of developments in economic activity and prices as well as financial
conditions, with a view to maintaining the momentum toward achieving the price
As expected, the board also left its economic assessment unchanged from its
previous meeting in July.
"Japan's economy is expanding moderately," the BOJ said. "Japan's economy
is likely to continue a moderate expansion."
Private consumption in Japan "has increased its resilience," backed by
improving employment and income conditions, while exports and industrial
production remain on an uptrend, the BOJ said. Business investment is on a
moderate increasing trend.
The bank noted overseas economies, on the whole, continued to grow at a
The board left its near-term assessment of domestic inflation unchanged
from the previous meeting, repeating, "Inflation expectations have remained in a
weakening phase" given the year-on-year rise in the core CPI (excluding fresh
food) is around 0.5%.
To gauge the outlook for inflation expectations, BOJ economists are focused
on the corporate inflation expectations portion of the September Tankan business
survey due out Oct. 3 and the household inflation expectations of the central
bank's quarterly survey of consumer sentiment due out Oct. 6.
The market focus is on the BOJ's next policy meeting on Oct. 30-31, when
the board releases its updated growth and inflation predictions as well as its
Ahead of their October meeting, BOJ policymakers will watch how business
sentiment and investment plans are evolving, as revealed in the Tankan survey
and anecdotal evidence from BOJ branch managers who will gather in Tokyo for
their quarterly meeting on Oct. 10.
The BOJ's analysis of risks was unchanged in Thursday's statement.
"Risks to the outlook include the following: the U.S. economic policies and
their impact on global financial markets; developments in emerging and
commodity-exporting economies; negotiations on the United Kingdom's exit from
the European Union and their effects; prospects regarding the European debt
problem, including the financial sector; and geopolitical risks," the bank said.
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