Japan’s central bank policymakers said it needs to stick with quantitative easing with inflation still well below its 2 percent price target, a summary of opinions of board members at the last rate review showed on Monday. One Bank of Japan board member said further yen strength and stock declines could curb capital expenditure and consumer spending, which could delay hitting the inflation target, the summary showed.
At the March policy meeting, the BOJ kept monetary settings unchanged and its chief brushed aside speculation of an early exit from quantitative easing.
“There is no change in the judgment that it is necessary to continue pursuing powerful monetary easing with persistence so that highly accommodative financial conditions are maintained,” one board member was quoted as saying.
The BOJ releases a bullet-point summary of the opinions voiced by the board members at its policy meetings roughly a week after they are held. The views do not identify whose opinions they are. A more thorough minutes of the debate will be issued several weeks later.
The BOJ is not at a point where it can consider normalising policy, but the BOJ should explain that normalising policy is not the same as tightening policy, one member said.
This remark underscores the communication challenge the BOJ faces, as subdued inflation forces the bank to maintain its massive stimulus despite the rising costs of the policy, such as the hit to bank profits from near-zero interest rates.
The yen has risen around 6 percent versus the dollar and the Nikkei share average has fallen around 5 percent so far this year, partly due to uncertainty about the course of US monetary policy.
A rising yen tends to worry Japanese policymakers because it can reduce exporters’ earnings and increase deflationary pressure by lowering import prices.
Consumer sentiment also tends to weaken during a period of prolonged declines in stock prices.