Some Bank of Japan policymakers warned that global uncertainties and last year’s sales tax hike may have hurt capital spending and inflation expectations, minutes of the central bank’s December rate review showed on Friday.
One member said the BOJ might need to ramp up stimulus depending on how much damage the tax hike inflicts on private consumption, the minutes showed.
Such calls for more stimulus are unlikely to materialise any time soon, as the minutes showed others in the board fretting over the rising cost of prolonged easing such as the strain ultra-low interest rates is imposing on commercial banks.
But the gloomy view on the economic outlook underscores market expectations that soft inflation would force the BOJ to maintain its ultra-loose policy for the time being.
“Considering the risk that overseas economies could recover only to a small extent or slow further, the outlook for exports could not be viewed optimistically,” a few in the nine-member board was quoted as saying.
At the December meeting, the BOJ kept monetary policy steady but its Governor Haruhiko Kuroda warned that risks to Japan’s economic recovery remained high.
While the BOJ concluded that public perceptions of long-term price moves were holding up, a few members said households’ short-term inflation expectations had declined since last October’s sales tax hike, the minutes showed.
Some also voiced concern that households’ income may fall as manufacturers, hit by slowing global demand and the fallout from the U.S.-China trade war, could slash winter bonus payments.
“Close attention should be paid to how developments in corporate profits … would affect winter bonuses,” the minutes quoted them as saying.
Some also said it was a “matter of concern” that leading indicators of capital expenditure – a rare bright spot in the economy – was showing signs of weakness, the minutes showed.
Japan’s economy ground to a near halt in July-September and is likely to have contracted in the final quarter of last year as global trade tensions knocked exports. BOJ officials are counting on a rebound in global growth that would underpin the export-reliant economy.Get access to India’s fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code “GETPRO”. Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.
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