TOKYO (Alliance News) - The members of the Bank of Japan's monetary policy committee were satisfied that the current monetary policy stance remained appropriate, minutes from the bank's April 30 meeting revealed on Wednesday.
The underlying inflation trend was improving steadily, the minutes showed, although there was some debate about achieving the target goal of 2%.
The members also were pleased at the pickup in business investment.
"The underlying trend in inflation had been improving steadily, judging from developments in the output gap and medium- to long-term inflation expectations, both of which were factors that determined the underlying trend in inflation, and that therefore it was not necessary at this point to make adjustments to the guideline for monetary policy," the bank said.
At the meeting, the bank kept its benchmark interest rate unchanged at 0.1%, and also decided by an 8-1 majority vote to maintain the size of quantitative and qualitative easing. Accordingly, the bank will continue to increase the monetary base at an annual pace of about JPY 80 trillion.
"With a view to encouraging a decline in interest rates across the entire yield curve, the Bank will conduct purchases in a flexible manner in accordance with financial market conditions. The average remaining maturity of the Bank's JGB purchases will be about 7-10 years," the bank said.
The BoJ last expanded the stimulus in October after it noted downward pressure from a substantial decline in crude prices hindering its ability to reach 2% inflation target.
Inflation outlook for the fiscal 2016 was downgraded to 2% from 2.2%. For fiscal 2017, the bank sees the consumer price index (all items less fresh food) to rise 3.2%.
"As for prices, excluding the direct effects of the consumption tax hike, the producer price index (PPI) had declined relative to three months earlier at a reduced pace, reflecting movements in international commodity prices. The year-on-year rate of increase in the CPI (all items less fresh food) was about 0%," the bank said. Further, the bank said real growth is set to improve but slightly less than previously projected for FY 2015 and 2016. The economic growth for FY2015 is seen at 2% versus the 2.1% estimated in January. Likewise, the outlook for FY 2016 was downgraded to 1.5% from 1.6%. The bank expects growth to slow notably to 0.2% in fiscal 2017. The slowdown would be largely caused by the effects of a front-loaded increase and subsequent decline in demand prior to and after the consumption tax hike planned in April 2017, it said.
"Many members shared the recognition that QQE had been exerting its intended effects, and that the Bank would continue with QQE, aiming to achieve the price stability target of 2%, as long as it was necessary for maintaining this target in a stable manner. These members continued that, in doing so, it would examine both upside and downside risks to economic activity and prices, and make adjustments as appropriate," the bank said.
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