Bank of Japan policymakers agreed during their April 3-4 policy-setting meeting that the central bank needed to enter "a new phase of monetary easing," with some members calling for steps that would have an impact on financial markets, the minutes of the meeting showed Thursday.
"Some members expressed the view that it was important for the bank to introduce a policy that would have an impact in terms of scale, so that the markets would perceive that it had decided to take all necessary measures" to attain the 2 percent inflation target, the minutes said.
At its first policy meeting chaired by Governor Haruhiko Kuroda, the BOJ decided to double the monetary base in two years, adopting the monetary base as the main operating target for money market operations instead of the overnight call rate.
Many members expressed the view that it was necessary to reconsider the overall framework of the monetary easing policy conducted by previous Governor Masaaki Shirakawa, saying, there "appeared to have been limitations with regard to policy effects it could further pursue."
Recognizing the need for the central bank to "enter a new phase of monetary easing both in terms of quantity and quality," the members agreed to stop adopting measures incrementally, the minutes said.
The members also concurred on the importance of the bank communicating to the public "in a clear and intelligible manner," with one member saying its policy framework had been complicated and difficult to understand and its communication to the public was "not necessarily effective," undermining policy effects.
Meanwhile, some members pointed out possible side effects of the drastic easing policy, such as restrained returns on investment of institutional investors, such as life insurance companies and pension funds, as well as a rise in speculation that the BOJ was engaged in financing the government's debt.
Policy steps introduced by the BOJ include additional purchases of government bonds and risky financial assets such as exchange-traded funds and real estate investment trusts, aiming to pump a large amount of money into the market.
The members agreed that it was necessary to boost demand by exerting influence on long-term interest rates and asset prices, and to drastically change the existing deflationary expectations of markets and entities in order for the BOJ to attain the 2 percent inflation target in about two years, according to the minutes.
One member, however, noted that uncertainty was high regarding the effects of asset purchases in terms of raising inflation expectations, citing the existing results of quantitative analysis.