Members of the Bank of Japan's monetary policy board are firmly committed to defeating deflation and achieving price stability, minutes from the bank's board meeting on January 21 and 22 revealed on Tuesday.
The BoJ also warned that circumstances in Europe and the United States will continue to pose downside risks to the Japan economy - which is otherwise expected to level off.
"(The economy) is likely to level off more or less for the time being, and thereafter return to a moderate recovery path as domestic demand remained resilient, partly due to the effects of various economic measures, and as overseas economies gradually emerged from the deceleration phase," the minutes said. "Some members were of the view that the possibility of Japan's economy returning to a moderate recovery path had heightened to a considerable degree.
At that meeting, the BoJ doubled its inflation target to 2 percent in a bid to end deflation. The central bank also announced open-ended asset purchases from next year.
BoJ adopted the new inflation target in a split vote with Policy Board members Takehiro Sato and Takahide Kiuchi voting against the proposal. Seven out of nine members of the board voted in favor.
The Policy Board also voted unanimously to keep the benchmark uncollateralized overnight call rate at around 0 to 0.1 percent.
"If the recent trend of the yen's depreciation continued, this could be expected to have positive effects on prices through an improvement in economic activity and a rise in inflation expectations," the minutes said.
After completing the current purchasing period, the bank said it will introduce a method of purchasing a certain amount of financial assets every month without setting any termination date, from January 2014. The introduction of the open-ended asset purchasing method was also passed by a unanimous vote.
Following the introduction of this method, BoJ will make monthly asset purchases of JPY 13 trillion, including JPY 2 trillion in Japanese government bonds and JPY 10 trillion in Treasury Bills. As a result, the total size of the asset purchase program will be increased by JPY 10 trillion in 2014, which will be maintained thereafter.
"With a view to clearly presenting the Bank's stance of pursuing aggressive monetary easing - aiming to achieve the 'price stability target' - it was desirable to introduce a method to continue purchasing a certain amount of financial assets every month without setting any termination date," the minutes said.
The bank also decided to release a joint statement with the government, to strengthen their policy coordination. Two of the policymakers dissented against this decision.
The bank stuck to its assessment of global economy and said that the overseas economies remained in a deceleration phase. Japan's economy remained relatively weak and exports and industrial production have decreased, the bank said.
"The U.S. economy generally continued to recover at a moderate pace, particularly in the household sector, although signs of weakness were observed in the corporate sector," the minutes said. "Economic activity in Europe had receded slowly. As a result of the weakening of sentiment and the effects of fiscal austerity, both business fixed investment and private consumption had been declining. Growth in exports was sluggish as well."
by RTT Staff Writer
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