The Bank of Japan’s most dovish board member called for cautiousness over making any policy change, as the central bank’s inflation goal still remains out of reach.
(Bloomberg) — The Bank of Japan’s most dovish board member called for cautiousness over making any policy change, as the central bank’s inflation goal still remains out of reach.
“We still need more time before turning to policy tightening,” board member Toyoaki Nakamura said in a speech to local business leaders in Gifu, western Japan Thursday. “The sustainable and stable achievement of the 2% inflation target accompanied by wage growth isn’t in sight yet.”
Nakamura’s remarks illustrate the wide range of views that exist within the nine-member board, a day after a leading hawkish member said the attainment of the 2% price goal is “clearly” within sight. The disparate stances may explain why Governor Kazuo Ueda has said uncertainties surrounding inflation are “extremely high” for both the upside and downside.
Nakamura was the only dissenter against the BOJ’s decision last month to loosen its grip on yield curve control. The former Hitachi Ltd executive said then that the bank needed to confirm improving corporate profitability first before making such a move.
Premature tightening would hurt the earning power of businesses, without data showing a rise in sales prices leading to wage growth, Nakamura said during Thursday’s speech. Careful decision making is warranted ahead of any policy adjustment, he added.
In stark contrast, Naoki Tamura, leading hawkish board member and former private bank executive, indicated Wednesday there is a chance for ending the negative interest rate early next year, as the bank could confirm its inflation mission has been accomplished around the first quarter.
Most BOJ watchers don’t expect any policy change this year, after the central bank essentially allowed 10-year bond yields to rise toward 1% on July 28. April is the most popular month for a policy shift forecast, according to the latest Bloomberg survey.
While Nakamura mostly struck a cautious tone and called for structural change in the economy, he also signaled a slight shift in his view on how long this extraordinary easing should go on.
Unlike his last speech in December, Nakamura added “for the time being” when he said the bank needs to continue with patient easing. That indicates the board’s focus is perhaps shifting more toward when a policy normalization step may be justified, rather than whether.
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