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BoJ minutes reveal diverging views on future policy direction

The minutes from BoJ meeting held on July 27 and 28 have unveiled differing perspectives among board members regarding the future direction of monetary policy. While a consensus was apparent on the immediate need to sustain ultra-low interest rates, members were divided on how to approach the medium to long term.

One member stated, “there was still a significantly long way to go before revising the negative interest rate policy, and the framework of yield curve control needed to be maintained”.

The same member emphasized the importance of patience and consistency, suggesting that “it should carefully nurture the long-awaited signs of change in firms’ behavior by patiently continuing with monetary easing.”

Another participant weighed the risks of delaying versus hastening monetary tightening. In their perspective, the “risk of missing a chance to achieve the 2 percent target due to a hasty monetary tightening outweighed the risk of the inflation rate continuing to exceed 2 percent if monetary tightening fell behind the curve.”

Yet another member presented a more optimistic outlook on the inflation target, noting that the “achievement of 2 percent inflation in a sustainable and stable manner seemed to have clearly come in sight.” They further suggested that between January and March 2024, it might be feasible to evaluate the Bank’s success in achieving the inflation target.

Despite the differences in outlook, BoJ decided to persist with its current easing policy settings but also opted to grant long-term borrowing costs more flexibility to rise.

Full BoJ minutes here.

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