Bank of Japan Governor Haruhiko Kuroda refused in 2013 to water down the central bank's commitment to attaining 2 percent inflation in "about two years," brushing aside worries among some board members about the ramifications of missing the target, minutes of the meeting showed Wednesday.
Nearly six months after taking the helm at the BOJ in March 2013, Kuroda defended the inflation target as showing the central bank's "strong determination" to pull Japan out of deflation, telling a policy meeting in August 2013 that the purpose of its monetary policy was to boost people's expectations that prices will rise.
"It is not appropriate to communicate our stance in a way that will water down the part (about achieving 2 percent in around two years) because our policy objective is to work on inflation expectations," Kuroda was quoted as saying at the Aug. 7-8 meeting.
Kuroda led the central bank into uncharted territory with powerful monetary easing that has largely continued to this day. At the time, the BOJ had a target of achieving 2 percent inflation at the earliest possible time, "with a time horizon of about two years."
To achieve the objective, the central bank embarked on aggressive buying of assets, such as government bonds and exchange-traded funds, to inject funds into the economy.
Core consumer prices, which exclude volatile fresh food items, fell 0.5 percent in March when Kuroda became governor, but Japan saw the key gauge of inflation rise 0.8 percent in August 2013.
The 2 percent goal, however, was not achieved during Kuroda's ten-year tenure, though Kazuo Ueda, the current governor, now believes the likelihood of Japan achieving stable inflation backed by strong wage growth is "gradually increasing." Financial markets expect an end to its negative rate policy this year, which was introduced under Kuroda.
The minutes of the August meeting, along with those held in late 2013, show the difficulties and challenges faced by the Policy Board in proceeding with the unprecedented monetary easing, which formed a key pillar of "Abenomics," an economy-booster program spearheaded by then Prime Minister Shinzo Abe.
The BOJ's ultraeasy monetary policy under Kuroda, once called his "bazooka," initially lifted stocks and weakened the yen. But the central bank was later forced to repeatedly push back the inflation goal and some economists viewed the BOJ's forecasts as too optimistic.
"Our commitment is crystal clear but there seems to be a prevailing view in financial markets that it won't be easy to achieve 2 percent in about two years," Takahide Kiuchi, one of the then board members, was quoted as saying.
"Financial markets are concerned about high uncertainty over the future of monetary policy due to the absence of our communication," Kiuchi said. He also expressed concerns about the risks that market pressure will increase on the BOJ to take further easing steps if the specific time frame for achieving 2 percent was maintained.
A few months later in October, some board members expressed skepticism about the BOJ's upbeat view on inflation, noting that it should underscore downside risks before the release of new forecasts on the economy and prices.
At the Oct. 31 meeting, three board members opposed a draft outlook report presented by Kuroda, which said the country's inflation rate would be "likely to reach around 2 percent" by the end of the projection period through fiscal 2015.
Among them, board member Takehiro Sato called for the wording to be toned down to reflect his more cautious inflation outlook, a stance also echoed by Kiuchi.
Another dissenter, Sayuri Shirai, said the BOJ should explain to the public why 2 percent was necessary, adding the progress up to that point toward attaining the inflation goal had not been smooth, as stated in the governor's version.
"My concern is huge damage will be done to confidence in the BOJ's economic and price outlook and monetary policy if we continue to maintain optimistic forecasts like this and (the numbers) significantly undershoot the forecasts," Sato said.
The policy board members' median forecast for the core CPI was a 2.6 percent increase in fiscal 2015. Without the effects of consumption tax hikes, a 1.9 percent rise was forecast. In reality, it marked zero percent growth.
The BOJ releases fuller minutes of policy meetings a decade they are held.
