Majority of Bank of Japan's policymakers said that the drop in oil prices will affect the economy and inflation positively in the long-term, though it is expected to weigh on inflation in the short-term, the minutes of the meeting held on December 18 and 19 showed Monday.
However, one member said that the primary focus should be on the underlying trend in prices when considering the future conduct of monetary policy, and that the key was developments in inflation expectations in a broad context, the minutes said.
The producer price index was expected to continue declining for the time being, reflecting movements in international commodity prices and the annual increase in consumer prices was likely to be at around the current level of the time being, the report showed.
Policymakers decided to continue expanding the monetary base at an annual pace of JPY 80 trillion by an 8-1 majority vote as the economy is expected to continue to recover.
The minutes showed that the bank will keep its monetary policy stable as long as the economy stays on the recovery path.
Board members also said that the monetary policy easing in October was not directly linked to the slump in oil prices, but to prevent slowing inflation from bringing down inflation expectations.
The bank said that housing investment and industrial production have started to bottom out. Meanwhile, the bank's view on exports, public investment, employment and income situation and private consumption remained positive.
Also, the central bank reiterated that financial conditions were accommodative.
The BoJ renewed its pledge to continue its monetary easing as long as it is necessary to maintain inflation near its price stability target of 2 percent.
"(The central bank) will examine both upside and downside risks to economic activity and prices, and make adjustments as appropriate," the minutes said.
Data from the Ministry of Finance showed that Japan's trade deficit decreased more than expected in December as exports rose more than imports.
Marcel Thieliant, Japan Economist at Capital Economics said that the surge in exports reflected the weaker exchange rate, which lifted the yen-value of shipments.
Meanwhile, the weakness in the annual growth rate of import values reflects both a surge in import volumes a year ago ahead of the sales tax hike as well as broadly stable import costs, he added.
Indeed, lower energy prices may briefly return the trade balance to surplus in coming months, before a weaker yen and a rebound in the oil price push it back into deficit, he said.
For comments and feedback contact: editorial@rttnews.com
Business News