A Bank of Japan policymaker said that the central bank should review its yield cap program "at an early stage," noting its high costs, a summary of opinions from its June policy meeting showed Monday.
Some BOJ Policy Board members pointed to the possibility that inflation will not slow as much as expected, remaining above the central bank's 2 percent target, as the price-setting behavior of Japanese companies has been changing.
As part of its monetary easing, the BOJ has been seeking to keep borrowing costs extremely low through purchases of government bonds. Under its yield curve control program, short-term interest rates are set at minus 0.1 percent, while 10-year Japanese government bond yields are guided to around zero percent.
Some BOJ watchers expect the yield cap program to be modified at the next policy-setting meeting in July, when the central bank is widely expected to upgrade its inflation outlook.
"The bank should maintain the overall framework of monetary easing for the time being, since the cost of waiting for such achievement is not high. That said, as for yield curve control -- a policy tool for monetary easing -- the cost is high," one member said.
The member pointed to the need to prevent sharp fluctuations in interest rates when the BOJ exits its current monetary policy in the future, improve market functioning and better communicate with financial markets.
"Given all of this, a revision to the treatment of yield curve control should be discussed at an early stage," the member said.
The summary of opinions was compiled by Governor Kazuo Ueda and comments were not attributed to individual members. At the June 15-16 meeting, the BOJ board unanimously decided to maintain its ultralow rate policy.
"Corporate behavior has seen clear changes, and price and wage hikes have been incorporated into corporate strategy," a member said. "It is highly likely that the year-on-year rate of increase in the (core) CPI will decelerate toward the middle of fiscal 2023 but will not fall below 2 percent."
According to the BOJ's forecasts, the core consumer price index, excluding volatile fresh food items, will rise 1.8 percent in fiscal 2023 from a year earlier as the effects of higher import costs, driven by a weak yen, will dissipate.
One member said there is a "significant risk of missing a chance" to attain the inflation target due to a hasty policy change.
"That said, due attention is required because the possibility that the persistence of price rises in Japan has been underestimated cannot be ruled out, as were the cases with Europe and the United States," the member added.
