Gradual Reversal of Stimulus
In a move signaling their growing conviction that conditions were ripe for phasing out its massive stimulus, the BOJ recently hinted at pulling short-term interest rates out of negative territory. However, the minutes revealed that some members suggested maintaining a degree of monetary easing even after ending negative interest rates and yield curve control.
Assessing Market Impact
The minutes also showed calls for an analysis of the potential market impact of ending negative rates, as well as discussions on whether to maintain the framework for purchasing risky assets. It became apparent that there was no consensus on the timing and sequence of an exit, with members emphasizing that it would depend on prevailing economic conditions.
BOJ Governor’s Approach
BOJ Governor Kazuo Ueda has begun dismantling the complex stimulus program put in place by his predecessor, which included negative short-term rates, yield curve control, and large-scale bond and risky asset purchases. Analysts foresee the BOJ ending negative rates, most likely in April, after reducing the intensity of yield curve control last year.
Divided Opinions
The minutes revealed a split among board members, with some urging caution in ending negative rates too soon, while others believed the time for normalization was approaching. Members highlighted the importance of closely monitoring the outcome of this year’s spring wage negotiations as the risk of runaway inflation was deemed to be low.
Overall, the BOJ minutes reflect ongoing discussions and deliberations as policymakers navigate the path toward phasing out stimulus measures and adjusting interest rates in line with evolving economic conditions.