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BOJ's Dec meeting summary exposes board rift on depth of policy review
[TOKYO] Bank of Japan (BOJ) policymakers were divided on how far to go in tweaking its stimulus programme, with some calling for an overhaul of its strategy for achieving 2 per cent inflation, a summary of views voiced at the December rate review showed.
The policy examination will focus on tweaking the BOJ’s purchases of exchange-traded funds (ETF) and operations for controlling the yield curve, according to the summary of the Dec 17 to 18 meeting released on Monday.
BOJ governor Haruhiko Kuroda has said the policy review will not lead to big changes to yield curve control (YCC) and instead focus on fine-tuning the framework to make it more sustainable.
But some BOJ board members called for a more ambitious review as the hit to growth from Covid-19 stokes fears of a return to deflation, the summary showed.
“The BOJ must conduct a renewed comprehensive assessment on what strategy it should take in achieving its price target,” one of the nine members said.
“To avoid a return to deflation, the BOJ should assess its strategy, tools, and communication for achieving its price goal,” another opinion quoted in the summary showed.
In December, the BOJ extended the deadline for steps to ease funding strains for firms hit by Covid-19. It also unveiled a plan to seek ways to make its policy more sustainable, as the pandemic pushes prices further away from the 2 per cent goal.
Some members said the BOJ could make its ETF purchases more flexible, so it can sustain the programme for a prolonged period and ramp up buying if markets turn volatile, the summary showed.
Others saw room to tweak the YCC’s operations such as by seeking to control yields “more carefully” and allowing for a moderate steepening of the yield curve, it showed.
Under the YCC, the BOJ guides short-term interest rates at -0.1 per cent and 10-year bond yields around zero through massive bond-buying.
It also purchases huge amounts of ETFs and other risky assets, a policy that has drawn criticism from some investors for distorting pricing and drying up market liquidity.