Bank of Japan board divided on economy’s strength upon stimulus exit, March summary shows

BANK of Japan policymakers were divided on whether the economy was strong enough to weather an exit from ultra-loose monetary policy, a summary of opinions at the bank’s March meeting showed, suggesting the next interest rate hike may take time.

The BOJ ended eight years of negative interest rates and other remnants of its unorthodox policy last week, making a historic shift away from its focus on reflating growth with decades of massive monetary stimulus.

At the meeting, some policymakers said recent data, such as bumper wage hikes offered by big firms, justified ending ultra-loose policy as sustained achievement of the bank’s 2 per cent inflation target was in sight, the summary showed on Thursday.

But several in the nine-member board called for more scrutiny on whether wage gains will spread to smaller firms, and the extent to which expectations of rising labour costs were pushing up services prices, the summary showed.

“Even if the BOJ ends negative rate policy, it would need to emphasise its cautious stance as the economy is not in a state where rapid interest rate hikes are necessary,” one member was quoted as saying.

The decision at the March 18-19 meeting to exit ultra-loose policy was made by a 7-2 vote with former academic Asahi Noguchi and ex-corporate executive Toyoaki Nakamura dissenting. REUTERS