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BOJ policymakers divided over outlook for wages, inflation, January meeting summary shows

By Leika Kihara

TOKYO (Reuters) – Bank of Japan policymakers are divided over the prospects for achieving their 2% inflation target, with some warning that sustainable wage increases could Taking time, a summary of comments from the most recent meeting was released Thursday.

The divergence of views underscores policymakers’ struggle to determine whether a near-term rise in cost-driven inflation will shift to stronger demand and higher wages – a prerequisite for raising ultra-low interest rates.

At the January meeting, many board members agreed on the need to preserve ultra-loose monetary policy to support the economy and help businesses raise wages, the summary showed.

While some on the nine-member committee pointed to a wider range of price increases and stronger prospects for wage gains, others said price growth would start to slow as cost-push pressures eased, the summary showed.

“Companies are increasingly keen to raise prices and ges. This could create a virtuous cycle between the economy and prices, driven by higher corporate profits,” a board member was quoted as saying .

“Some companies are wary of raising wages. Sustained wage increases will take time, so macroeconomic support is necessary,” another opinion said.

“Consumer inflation may fall back below 2%. At present, we are still some distance away from achieving our price target,” according to a third-party opinion.

At the January 18-18 meeting, the Bank of Japan maintained ultra-low interest rates but strengthened monetary policy tools, To prevent the 10 year bond yield from breaching the 0.5% cap just set a month ago.

The central bank’s massive bond purchases in defense of a yield cap have drawn criticism from market participants for distorting the shape of the yield curve and draining market liquidity.

However, the board debate focused on the need to keep long-term interest rates low, the summary showed, suggesting the Bank of Japan was in no rush to wind down its massive stimulus programme.

“To encourage companies to work hard to transform and raise wages sustainably, the BOJ must hold down interest rates across the yield curve while focusing on the functioning of the bond market,” said one of the board members.

The summary lists the views of the BOJ’s nine board members, but does not say who they are.

Japan’s core consumer prices rose 4.0% year-on-year in December, hitting a new high 41 This year’s high and maintaining the market’s view that the Bank of Japan may Phase out expectations of ultra-low interest rates.

BOJ Governor Haruhiko Kuroda, whose term ends in April, stresses the need to maintain accommodative policy settings until wages rise sufficiently and help keep inflation at the bank’s 2% on a sustained basis near the target.



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