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Some Bank of Japan policymakers cited differences over inflation expectations in opposing the central bank's view adopted in late April that it is likely to achieve its 2 percent inflation target in about two years, the minutes of the meeting showed Monday.
During their meeting on April 26, most of the nine Policy Board members expressed the view that the consumer price index is likely to post a 2 percent rise toward the latter half of the three-year period through March 2016, reflecting factors such as an improvement in the supply and demand balance and a rise in inflation expectations.
But some members said it "seemed difficult to achieve" the target in such a timeframe, because "it was highly uncertain whether changes in inflation expectations would lead to a rise in the actual rate of inflation," the minutes said, without naming the members.
After the meeting, the BOJ said in its semiannual economic outlook report that it expects the country's inflation rate to reach 1.9 percent in fiscal 2015, almost achieving its target of 2 percent in about two years, backed by its aggressive monetary easing.
But the central bank said at the time that two board members, Takahide Kiuchi and Takehiro Sato, opposed the statement issued in the report that the year-on-year rate of change in the CPI "is likely to reach around 2 percent...toward the latter half of the projection period" through fiscal 2015.
According to the minutes, one member warned that if the BOJ presented an inflation rate projection with high uncertainty and the actual rate turned out to be lower, "there was a significant concern that this could undermine the credibility of the bank's outlook for prices and its monetary policy."
As for the board's decision to extend the projection period to around three fiscal years from two years, a few members pointed out, while agreeing with the decision, that such a move would heighten uncertainty regarding the outlook and it would not contribute to enhancing the transparency of the BOJ's communication with the public.
On the bond market, which became turbulent after the introduction of new monetary easing steps on April 4, one member said that potential instability remained in the market, while another member said a rise in interest rates could indicate a pickup in expected inflation rates and an underlying upturn in economic activity.
On the outlook for the economy, one member said the medium to long-term growth expectations of firms and households would not rise if the government's regulatory and institutional reforms did not make progress and firms' efforts to tap potential demand did not proceed.
Members shared the recognition that Japan's economy could deviate upward from the baseline scenario if the path toward fiscal consolidation by the government became evident, alleviating people's concerns regarding the future, the minutes said.