BOJ board member sought rate hike without hesitation: Nov. minutes.
A Bank of Japan Policy Board member suggested during a meeting of the bank's decision-making panel on Nov. 15-16 that the BOJ should ''consider a policy change without hesitation if it can confirm economic and price conditions have been improving with more certainty,'' minutes of the gathering showed Friday.
The board member based the proposal on the condition that Japan's economy and price trends follow the scenario given in the central bank's outlook report released Oct. 31.
In the semiannual outlook report, the BOJ projected 0.3 percent inflation in fiscal 2006 and 0.5 percent in fiscal 2007 in terms of the consumer price index. It also forecast a real 2.4 percent economic growth in the current fiscal year through next March and 2.1 percent in fiscal 2007.
Some board members pointed out during the meeting that a gap exists between the BOJ and market participants on perceptions of economic conditions and called on the central bank to communicate with market players more closely.
On private consumption, which has shown weak trends since this summer, many BOJ policymakers said they believe bad weather conditions until July have affected personal spending, the minutes showed.
A board member expressed an optimistic view that consumer spending will not likely drop further because workers' income levels have been gradually rising. Another member pointed to structural factors such as a tendency in which growth in income does not directly cause a rise in consumption in a graying society.
Meanwhile, the minutes of the BOJ's Oct. 31 policy meeting showed that some policymakers stressed the importance of fully explaining to market players that the bank puts priority on basic trends in economic and price conditions, rather than moves in each economic indicator, in operating its monetary policy.
The document was also released Friday. Some policymakers also warned about the impact of low interest rates in Japan on international financial markets.
Analysts say loose credit conditions in Japan have expanded yen-carry trades, in which investors borrow cheap funds in Japan to invest in higher-yielding assets elsewhere.
In both the October and November meetings, the BOJ unanimously decided to keep its key short-term interest rate steady at 0.25 percent.
Market players are wondering when the central bank will raise its rate again following the termination of the zero-interest-rate policy in July.
The BOJ left unchanged the benchmark rate in its last policy meet in 2006 earlier this week, citing weak trends in private consumption and price increases.
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|Publication:||Japan Weekly Monitor|
|Date:||Dec 25, 2006|
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