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BOJ minutes see 'a few' members split on meeting 2% inflation goal
Aggregated Source: Shanghai Daily: Business

MINUTES released by the Bank of Japan highlighted a split among policy makers over achieving 2 percent inflation and mixed views on bond market turbulence after Governor Haruhiko Kuroda cited signs the economy is picking up.

"A few" policy makers said that it's "highly uncertain whether changes in inflation expectations would lead to a rise in the actual rate of inflation," according to a record of an April 26 meeting, released yesterday in Tokyo. One member said the bond market may become unstable again, while another said rising rates may point to an economic upturn.

Divisions in the board add to communication challenges for Kuroda, 68, as volatility in the stock and bond markets threatens to undermine business and consumer confidence. Kuroda said yesterday that the economy has clearly started picking up and there are no signs investors have "excessively bullish" expectations. He also cited a report indicating interest rates could rise 1-3 percentage points in an improving economy without causing financial instability.

"Kuroda should have explained why the market is volatile now and why he thinks it's going to be okay, rather than just saying he doesn't see any major problem," said Kazuhiko Ogata, chief Japan economist at Credit Agricole SA in Tokyo. "Kuroda hasn't yet learned how to communicate well with the market."

"A few" BOJ board members said that swings in financial markets had been triggered by perceptions that the BOJ had conflicting goals - trying to push down interest rates while pursuing inflation, the minutes showed. According to JPMorgan Chase & Co, the BOJ uses the term "a few" to mean two.

The Topix slid 3.4 percent yesterday, after plunging 6.9 percent on May 23. The gauge is up 34 percent this year.

The Nikkei 225 Stock Average lost 3.2 percent yesterday.

In the BOJ minutes, "a few" members saw difficulties reaching 2 percent inflation by the end of March 2016.

Kuroda was speaking to the Japan Society of Monetary Economics at Hitotsubashi University, where he was once a professor, two months after taking over as BOJ governor with a pledge to do whatever it takes to defeat deflation. On April 4, he unveiled a plan to double money in the economy over two years by raising bond purchases, chasing a target of 2 percent inflation.

There's no sign at this point of excessively bullish expectations in asset markets or in the activities of financial institutions, Kuroda said. He also restated that, while central bank asset purchases are intended to drag yields down, the reverse may happen in an improving economy.

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