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A summary of comments from the Bank of Japan's December meeting, released on Wednesday, showed that some BOJ policymakers called for more in-depth discussions on a future exit from ultra-loose monetary policy as the Japanese economy makes progress toward meeting the central bank's price target.
While the council agreed to maintain the massive stimulus for the time being, the views of the nine members were divided, with some cautious about raising interest rates and others arguing that it was necessary to start preparing for future exits.
One member said the time for the BOJ to normalize policy was "getting closer" given the growing likelihood that the BOJ would achieve its 2% inflation target in a sustainable manner. This ** said:
"To avoid high prices hurting consumption and weakening the chances of achieving the ** target, we should not miss the opportunity to normalize monetary policy. ”But another member said the central bank could at least wait until the outcome of the wage talks next spring, because inflation is unlikely to significantly exceed the 2% target even if wages are large.
At its December 18-19 meeting, the Bank of Japan left its ultra-loose policy unchanged and did not change its ** guideline, which is to commit to additional monetary easing measures if necessary.
Another view is that the BOJ's current** forward guidance will not necessarily limit the BOJ's rate adjustments, according to the summary.
Many market participants expect the Bank of Japan to end its negative interest rate policy next year, and some believe that the Bank of Japan is likely to adjust its policy in January or April next year.
Japan's inflation rate has remained above 2% for more than a year, and some companies have said they are prepared to continue raising wages, raising the chances that the BOJ will eventually start raising interest rates and shed its outlier status among global central banks.
Since taking office in April, BOJ Governor Kazuo Ueda eased the YCC policy in July and October and moved towards scrapping his predecessor's aggressive easing stimulus. The market expects that the central bank's next step will be to move short-term interest rates from the current -01% is raised to around zero.
Ueda said on Monday that the likelihood of achieving the BOJ's inflation target was "gradually rising", hinting at the possibility of a policy shift by the BOJ, but he also stressed that the BOJ would be patient in maintaining monetary easing to ensure that signs of change in corporate wages and setting behavior persist.
However, former BOJ committee member Masai Takako believes that BOJ Governor Kazuo Ueda must change his communication style, which can give the market the false impression that Japan is about to exit its ultra-loose monetary policy.
Less than a year into office, Ueda's comments on the policy outlook have caught markets off guard twice, one on 7 December, when he elaborated on what the Bank of Japan might do after ending its negative interest rate policy, leading the market to expect it to end negative rates as early as December, but the BOJ did not change its existing policy and guidance this month.
In addition, Takako noted that Kazuo Ueda's hawkish rhetoric contrasts sharply with recent statements by several committee members warning against premature discussions about withdrawing from easing, which raises doubts about whether he properly represented the committee's views in public.