BOJ policymakers split over achieving 2% price target: minutes

Bank of Japan policymakers were split over whether the central bank would be able to attain its 2 percent inflation target in about two years as pledged in April, with some members saying it would be "difficult," minutes of their Oct. 31 showed Tuesday.

The BOJ's economic outlook report released on the day said the central bank expected the country's inflation rate to reach 1.9 percent in fiscal 2015, but three out of nine Policy Board members voiced an opposing view. The number in opposition was bigger than in the previous outlook report in April, when only two dissented.

While most members expressed the view that Japan's economy was likely to achieve around 2 percent inflation toward the latter half of the projection period between fiscal 2013 and fiscal 2015, "a few members said that it seemed difficult to achieve" the target within the timeframe, the minutes said.

One member pointed out that the rise in consumer prices, which climbed 0.7 percent in September, "had already peaked as the effects of the rapid depreciation of the yen had dissipated." Another member cited the possibility that the effects of increasing prices stemming from a weaker yen and rise in energy prices would soon disappear.

The minutes also showed one member expressed concern that the credibility of the BOJ's outlook and of its monetary policy could be undermined if the observed inflation rate did not align with projections. The member was quoted as saying it was "highly uncertain" that the expected inflation rate would rise toward the 2 percent target.

Such views contrast with forecasts presented by BOJ Governor Haruhiko Kuroda, who has been expressing confidence that the central bank is on track to attain the 2 percent target, as its ultraloose monetary policy has been generating positive intended effects.

Kuroda said Monday the BOJ is likely to achieve the goal in late fiscal 2014 or early fiscal 2015, while admitting that the target is "very ambitious."

In order for prices to rise in line with the bank's projection, one member said wage increases would be very important, as they would not only further bolster private consumption but also heighten medium- to long-term inflation expectations.

At the Oct. 30 meeting, Takehiro Sato and Takahide Kiuchi called for revising the expression in the report that "Japan's economy is judged as likely to achieve around 2 percent inflation" toward the latter half of the projection period.

Sayuri Shirai proposed the adoption of a description which places more emphasis on downside risks and changing the current expression that the economy has been following the path toward achieving the 2 percent inflation target "as expected" to "at a moderate pace."

All of these proposals were rejected by a majority vote.