The Bank of Japan's summary of opinions describes underlying inflation as generally consistent with its 2 percent target, then shows members differing on what to do about it. The summary of the October 29 and 30 meeting, dated November 10 and embargoed until 8:50 a.m. Japan time that day, includes members who favoured holding the policy rate to study the effects of past hikes, and others who wanted the rate brought to neutral quickly. Earlier Tokyo Brief coverage
Hold, or hurry
One member said a little more examination of risks to activity and prices, and of financial conditions, was needed, so keeping the current rate at this meeting was appropriate. Another said holding would let the Bank assess the cumulative effects of past rate hikes.
Others pushed the opposite way. One said the Bank should decide on the next hike when it can do so "without becoming overly cautious". Another said the situation is a new phase in which the Bank must step up the pace of bringing the rate to neutral, because firms are more resilient to higher rates, past hikes have yet to fully work through and financial conditions remain accommodative. A third said underlying inflation has already reached 2 percent and the rate should reach neutral soon, though the Bank should watch conditions for a few months after each hike and "make haste slowly".
A member who judged that the policy rate has entered the estimated range of neutral still warned that a future hike could weigh on the economy and push underlying inflation down. Another said the neutral rate is likely "considerably above 1 percent". A further member said the next hike could constrain business fixed investment and housing investment somewhat, and that its effects on private consumption would be both positive and negative, with a significant negative net impact unlikely.
Inflation and wages
The summary says underlying CPI inflation can be judged generally consistent with the 2 percent target, and that the perspective now is anchoring it there. One member said anchoring is weaker in Japan than in Europe and the United States, which raises concern about how the economy would respond to outside shocks. The all-items-less-fresh-food CPI is projected to exceed 3 percent toward the end of the fiscal year.
Next spring's wage talks are the named test. One member cited firms saying they will raise wages next year at about this year's rate, and another judged that a significant rise in wage growth is unlikely, so second-round effects from current price rises are not a high risk.
ETF sales
Members also discussed the Bank's sales of exchange-traded funds, which began in January. One said they have gone smoothly without a major market impact and, with stock-market trading value expanding, it is appropriate to change the pace of sales. Another urged reassessing the volume that would cause the least disruption, with attention to the corporate-governance effects of a central bank holding ETFs.
The Ministry of Finance and the Cabinet Office each said the proposal reflects the Bank's disposals so far and that they expect the Bank to decide as appropriate. Both also said they expect monetary policy to pursue the 2 percent target while cooperating closely with the government.
The summary does not attribute opinions to named members. Each is the member's own submission, edited by the governor as chair.