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BOJ policy makers divided on easing


SOME Bank of Japan (BOJ) policymakers warned of risks to the economic outlook and called for discussion on ways to ramp up stimulus, a summary of views from the last rate review showed, a sign the central bank could loosen monetary policy as soon as next month.

Others, however, advised against immediate stimulus due to the strain prolonged easing was inflicting on financial institutions, highlighting the rift in the nine-member board between those who favour more action and those against it.

At the July meeting, BOJ policymakers debated heightening overseas risks that one member said could tip Japan into recession.

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"The BOJ must communicate more clearly its resolve to take additional monetary easing steps without hesitation if the momentum to achieve its price target is under threat," one of the members was quoted as saying.

"We must also consider in advance what steps we can take if we were to ease," the member added. The summary does not identify which members made the comments.

Several other opinions showed support for pre-emptive monetary easing to forestall risks. One said the BOJ must use both its interest rate targets and forward guidance to ease policy further, without elaborating, according to the summary.

"We need to assess the benefits and demerits of various monetary easing steps," one member said, a sign that the central bank has a range of easing options it could consider.

With interest rates hovering around zero, the BOJ is left with little ammunition to fight the next recession.

Prolonged ultra-low rates have also heightened the cost of additional easing by hurting financial institutions' margin.

A Japanese banking lobby head warned of the dangers to the industry if the BOJ deepened negative rates, saying such a move would affect "not just regional banks but the entire financial industry". REUTERS