Bank of Japan board members cited the need for a debate on a future exit from its ultlralow interest rate policy, while maintaining the current framework for the time being to ensure wage growth accelerates, a summary of their December meeting showed Wednesday.
One member said at the Dec. 18-19 policy meeting that the likelihood of achieving the BOJ's goal of stable inflation of 2 percent was rising and therefore the timing of policy normalization was "getting closer."
The nine-member Policy Board left its ultraloose monetary policy unchanged, with short-term interest rates set at minus 0.1 percent and 10-year Japanese government bond yields allowed to rise above 1.0 percent.
The decision, together with a lack of clear hints about an immediate policy change, dampened market expectations that the central bank would end its negative interest rate policy as soon as January.
"The bank is currently not in a situation where it would fall behind the curve if it did not rush to raise policy interest rates," one member said.
"It would not be too late even if the bank makes a decision after it sees developments in labor-management wage negotiations next spring," the member added.
Others, however, called for a debate on how to proceed with the normalization of policy. While Japan's headline inflation rate has remained above 2 percent for well over a year, the BOJ is yet to be convinced that a virtuous cycle of wage growth and prices is in place.
"Looking ahead toward the future exit from the current monetary policy, it is necessary to examine the positive effects and side effects of yield curve control and of the negative interest rate policy, and also consider their treatment," one member said.
Another member said the BOJ should avoid the risk of high prices hurting consumption and undermining the possibility of stable inflation being achieved, adding the bank "should not miss an opportunity in normalizing monetary policy."
BOJ Governor Kazuo Ueda said earlier this week that the outcome of annual wage negotiations next spring between labor unions and management will hold "the key," noting that he wants to see if pay increases "markedly."
The summary of opinions was compiled by the governor and comments were not attributed to individual members.
