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BOJ members agreed emerging economies will pick up longer term: minutes
[TOKYO] Bank of Japan policymakers agreed that emerging economies had suffered from weak growth but were likely to improve from a longer-term perspective, minutes of the central bank's August policy meeting showed on Friday.
Many in the nine-member board, however, said the BOJ must be vigilant to the risk of a decline in exports from a prolonged slowdown in China and other emerging economies, the minutes showed.
"Members agreed that a recovery in overseas economies and the effect of the weak yen would help exports rise moderately, albeit with some fluctuations," the minutes said. "Having said that, many members said they must closely watch how Japan's exports could be effected if emerging economies, including China, were to deteriorate further." The BOJ has kept monetary policy steady since expanding its massive stimulus programme in October last year to prevent slumping oil prices and a subsequent slowdown in inflation from delaying a sustained end to deflation.
They reaffirmed the view it was not oil price falls themselves that were important for conducting monetary policy, but how those falls affected the broad trend of inflation, according to the minutes.
Inflation has ground to a halt on the renewed declines in oil prices and sluggish private consumption, casting further doubt on the BOJ's forecast that inflation will hit its two per cent target by around September next year.
The BOJ's optimistic economic scenario is also under threat as weakening emerging market demand hurts exports and output, heightening the chance that any rebound in economic growth from a contraction in April-June will be modest.
The board members maintained their optimistic views at the August meeting, saying that the weakness in Japan's output and exports was temporary. They also agreed that private consumption would emerge from a soft patch blamed largely on bad weather, the minutes said.