The Bank of Japan could tweak the way it communicates its decision-making – and one member thinks its timetable for hitting an inflation target could be pushed back, yet again.
That’s the rough rundown from the ‘summary of opinions’ from its July 28-29 policy meeting, published today. The document, edited by Governor Haruhiko Kuroda, is a list of thoughts from that meeting as jotted down by monetary policy committee members and government officials.
The July meeting was hotly anticipated but failed to deliver the oomph the market expected, with the BoJ electing to maintain its negative interest rate at the level introduced in January and keeping the scope of its quantitative and qualitative easing programme on hold.
Two commentators spoke of the need for better communication. One monetary policymaker said:
Given that the Bank’s monetary policy measures are very aggressive and powerful, the Bank should provide more detailed and articulate explanations than before, thereby making sure that the policy measures have their intended effects.
Meanwhile, a government official present added:
The government also deems it important that the Bank will fully explain to the public its thinking on the changes in monetary policy.
Elsewhere, one policymaker said they did not believe that the BoJ would attain its 2 per cent inflation target by fiscal 2017 – the current timescale, for a goal which has been repeatedly postponed (in the original announcement in 2013, Mr Kuroda said he would get inflation to this level within two years).
It is less likely that inflation expectations will rise rapidly, and thus it is projected that the inflation rate will not reach 2 percent in fiscal 2017.
There are also real concerns that, after more than 3 years of Abenomics and monetary easing, there is less and less left in the tank. From one sceptic (NB – in the end, the BoJ did ramp up its purchases of exchange traded funds to ¥6tn):
The annual purchase of ETFs of 6 trillion yen would be excessive, as purchases in such large amounts distort the pricing mechanism in the stock market and make the Bank’s exit policy more difficult. It also raises concern over an adverse impact on the Bank’s financial soundness.
And from another present:
An increase in the Bank’s ETF purchases would make it clear that monetary easing is approaching its limit. Moreover, this action can be regarded as an incremental approach to monetary easing, and there is a risk of triggering endless expectations for further monetary easing.
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