BOJ discusses inflation risks in subtle shift during debate

TOKYO: Broadening price rises in Japan prompted some central bank policymakers to warn last month that inflation may overshoot expectations, highlighting the challenge governor Haruhiko Kuroda faces in justifying ultra-low interest rates.

One board member went as far as saying the Bank of Japan (BOJ) must eventually communicate an exit strategy from ultra-easy

policy, a summary of opinions at the September meeting showed.

While many opinions called for the need to keep monetary policy ultra-loose to support the fragile economy, the comments highlight a gradual shift in the balance of the BOJ board once dominated by proponents of aggressive easing.

“There’s a risk consumer inflation may deviate significantly upward from our baseline scenario, partly due to the impact of exchange-rate moves.

“This needs to be examined humbly and without any preconceptions,” one board member was quoted as saying in the summary, released yesterday.

“Companies continue to announce plans of price hikes against the background of higher raw material costs. Price rises are likely to continue for a wide range of products,” according to another opinion shown in the summary.

At the Sept 21 to Sept 22 meeting, the BOJ maintained ultra-low interest rates and its guidance pledging to keep monetary policy ultra-loose until inflation stably achieves its 2% target.

It was the first meeting for two newcomers, who in July replaced a former commercial banker Hitoshi Suzuki and dovish economist Goushi Kataoka.

The BOJ remains an outlier among a global wave of central banks tightening monetary policy to combat soaring inflation, which has pushed the yen to 24-year lows against the dollar.