Bank of Japan board members called for vigilance to keep inflation in check

Some members of the Bank of Japan have urged the central bank to remain vigilant in addressing the risk of inflation. The policymakers said that the risk of inflation was accelerating at a higher-than-expected rate, as seen in the minutes of the policy meeting that happened in March.

Bank of Japan board members calls for vigilance to tame inflation

Some of the board members at the bank have said that there are some positive signs indicating that the economy in Japan is making significant progress in reaching the 2% inflation target set by the Bank of Japan. The board members’ concerns about inflation were highlighted in the minutes for a meeting between March 9 and March 10.

The board has also deliberated on how companies increased prices and passed on the increased costs to those purchasing raw materials. Moreover, the significant price increase was also broadening the services offered by the company.

One of the members of the central bank has said that it was necessary to use data and reflect upon the basic mechanism that triggered the price moves. This would help deepen the understanding that the board members have on the developments regarding inflation levels in Japan.

During the meeting held in March, the BOJ maintained an ultra-loose policy that included a 0.5% cap for a 10-year bond yield that came under attack from the financial markets. The markets are currently betting on a short-term interest rate increase amid the recent increases in inflation levels.

Uncertainty over Japan’s economic outlook

Some have said there are positive signs around prices in Japan amid the outlook shared by the Bank of Japan. Most members at the bank have said there was increased uncertainty over the economic outlook in Japan. Therefore, there was a need to guarantee the monetary policy was loose.

One of the board members said that “The BOJ must focus on the risk of missing the chance of achieving its price target with a premature policy shift, rather than that of being too late in modifying policy.”

Another board member also said that any debate made on a policy shift needed to be cautious because an immature reversal of the ultra-loose policy would have far-reaching effects on the public.

The meeting held in March by the Bank of Japan was the last one chaired by Haruhiko Kuroda. Kuroda retired as the governor of the bank, and he was replaced by Kazuo Ueda. The change was expected to also come with new developments regarding the monetary policy taken by the bank to battle inflation.

The financial markets are optimistic that Ueda will steer the BOJ away from the stimulus measures put in place by Kuroda. The stimulus measures adopted by Kuroda have attracted criticism from analyst for affecting the market pricing and dropping the profits reported by financial institutions.