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BOJ minutes: output gap improvement is slow, say a few members

A pedestrian waits to cross the road in front of the Bank of Japan headquarters in Tokyo, Japan, on Monday, Jun 10, 2013.

[TOKYO] A few members of the Bank of Japan's policy board said the bank's decision to delay the timing of meeting its inflation target partly reflects slow improvement in the output gap, minutes of the Bank of Japan's policy meeting on Oct 30 showed.

Concerns about the output gap were not shared by the majority, but they highlight a lingering worry that the BOJ's repeated delays of it 2 per cent price target belie the effectiveness to its quantitative easing.

"A few members added that the projected delay in the timing of reaching 2 per cent had also been partly attributable to a somewhat slow improvement in the output gap," the minutes showed.

At the meeting on Oct 30 the BOJ pushed back the timing of meeting its 2 per cent price target by six months to the second half of fiscal 2016 due to weak oil prices.

Two board members dissented from the bank's baseline scenario that inflation will reach 2 per cent by 2017, exposing a rift between policy board members.

The majority view was the delay in the price target was due to weak oil prices, the minutes showed. Many members said Japan's inflation trend is improving as prices excluding fresh food and energy rise, the minutes showed on Wednesday.

Members also said underlying inflation is improving as the number of items in the consumer price index that are rising starts to outnumber the items that are falling, the minutes showed.

At a subsequent meeting on Nov 18-19, the BOJ acknowledged that inflation expectations had weakened somewhat, which is another reason to question the impact of its large government debt purchases under quantitative easing.