BOJ members in no rush to change easing policy as inflation temporary

TOKYO Bank of Japan (BOJ) board members saw the need to underscore their commitment to accommodative monetary policy despite inflation temporarily accelerating toward its 2 per cent target, a summary of opinions at their April policy meeting showed yesterday.

Following the yen's recent sharp depreciation, some members said it reflected the difference in economic conditions between Japan and the US or Europe, and that the BOJ'S policy should not be aimed at "controlling" foreign exchange rates, the summary showed.

At the April 27-28 meeting, the Japanese central bank left its ultralow rate policy unchanged amid some market speculation regarding tweaks. To rein in a rise in 10-year government bond yields, the BOJ strengthened its commitment to keeping them within an allowed trading range. It offered to buy unlimited 10-year bonds at a rate of 0.25 per cent, the upper limit, every business day.

"The bank should maintain monetary easing in a straightforward manner until the price stability target, accompanied by a virtuous cycle in which both prices and wages rise, is achieved in a sustainable and stable manner," one opinion said.

Another said, "The challenge of monetary policy in Japan is not to curb inflation, but to overcome inflation that is still too low."

Japan's core consumer price index excluding volatile fresh food items rose at the fastest pace in two years, up 0.8 per cent in March from a year earlier. As the year-onyear effect of sharply lower mobile data fees is set to fade in the coming months and higher commodity prices have added upward pressure, the gauge of inflation is expected to near the BOJ'S 2 per cent target.

The policy difference between the BOJ and the US Federal Reserve, which has begun to raise interest rates to fight inflation, has weakened the yen.

Governor Haruhiko Kuroda has taken the view that a weak yen is generally positive for the economy, though he has begun to underline its negative aspects, given the rise in import prices for resource-poor Japan.

Still, the bank has cast doubt over the sustainability of such inflation in Japan.

One member stressed the need for the BOJ to be more "careful" in communicating its views on prices and monetary policy because households have perceived that inflation is picking up at a much faster pace than the actual rise.

"A pessimistic view on positive inflation could prevail among households as the pace of wage increases has not caught up with the pace of increase in perceived inflation," the opinion said.

The summary of opinions was compiled by Kuroda and comments are not attributed to individual members.

The challenge of monetary policy in Japan is not to curb inflation, but to overcome inflation that is still too low."