UPDATE: BOJ Opinions: One Says Need More Easing Pre Tax Hike

--Adds Details From 11th Paragraph

     TOKYO (MNI) - One of the nine Bank of Japan board members called for

considering additional monetary easing to stimulate economic activity ahead of

the sales tax hike planned for October 2019, the summary of opinions presented

at the bank's Sept. 20-21 policy meeting released Friday showed.

     The summary didn't say whether the board member proposed any specific

measures aimed at increasing the already large-scale easing.

     The board member was not identified but Goushi Kataoka, one of the two

board members who took office in July, told the September meeting that the

current easing stance is insufficient to achieve the BOJ's 2% inflation target.

     "As a consumption tax hike is scheduled in October 2019, it is necessary to

further stimulate aggregate demand by additional monetary easing so that the

price stability target will be achieved in a stable manner," the member said.

     The board also discussed the need to ease policy further in the event that

geopolitical risks were to intensify. "The BOJ needs to bear in mind that, if

geopolitical risks rise further, it may consider making policy adjustments as

appropriate to prevent a deflationary mindset from reemerging."

     At the meeting, the BOJ board decided in an 8-to1 vote to maintain its

current monetary easing stance under the yield curve control framework it

adopted about a year ago.

     Kataoka dissented, arguing current policy was insufficient to meet the 2%

policy goal by the current target date of sometime in fiscal 2019, according to

the BOJ's policy statement following its meeting.

     He was quoted as citing "an excess supply of capacity in the capital stock

and the labor market" as the reason for his objection but the statement didn't

show he made any counter-proposals to address the issue.

     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

2013.

     Kataoka also opposed the description of the board's inflation outlook.

     One member repeated the official line often presented by Governor Haruhiko

Kuroda: "The effects of the monetary easing policy under the current framework

will be further enhanced going forward through a rise in the natural rate of

interest and a decline in real interest rates, as Japan's economy increases its

growth potential and the inflation rate rises."

     The board acknowledged the challenge facing the BOJ.

     "Given the current level of the inflation rate, it is possible that it will

take some time to achieve the price stability target.  The longer this takes,

the higher the uncertainty in the external environment," one member said. 

     "Going forward, it is necessary to take into account both the

sustainability of the policy and the time constraint in achieving the target."

     The board was generally optimistic about the prospect of more firms passing

higher materials and labor costs onto their sales prices, supporting price gains

toward a stable 2%, after Takehiro Sato and Takahide Kiuchi have left the board

in July a the end of their five-year terms. The two were skeptical about the

effect of aggressive easing on boosting inflation and warned about side-effects

of massive asset purchases.

     "Mainly in labor-intensive sectors such as eating and drinking services,

there has been a gradual but steady increase in cases where firms are making

efforts to raise their prices and other firms are following suit," the summary

said.

     "It is likely that firms will eventually need to reflect in their sales

prices the increased costs that they cannot absorb through labor-saving

investment or streamlining of their business processes." 

     There was one cautious view: "The year-on-year rate of change in the CPI

(all items less than fresh foods) is likely to increase gradually toward 2%.

However, reaching 2% is likely to take some time as firms' deflationary mindset

has been persistent and their price-setting stance has been cautious."

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com

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