BOJ Minutes Show Concerns about Side Effects of Easing

November 5, 2018

Tokyo--A number of Bank of Japan policymakers expressed concerns over the side effects of the central bank's monetary easing at their Sept. 18-19 meeting, according to minutes of the meeting that were released Monday.

Some members said that "as developments in the profits of financial institutions had a cumulative impact on their financial strength, it was necessary to continue to carefully monitor the effects of the prolonged low-yield environment on such institutions' profits and the functioning of financial intermediation," the minutes showed.

At the previous monetary policy meeting in July, the BOJ decided to modify its monetary easing policy and tolerated certain fluctuations in 10-year Japanese government bond yields around its target of zero pct, out of consideration for side effects from the easing framework.

"The measure to strengthen the framework, including the introduction of forward guidance for policy rates in July, was being accepted by market participants without causing major confusion," one BOJ policymaker said at the September meeting.

Still, one member said that "there seemed to be a limit to continuing with large-scale monetary easing for a long period when taking into consideration its side effects on the financial front."

"It was important to cautiously examine, from a longer-term perspective, whether or not there were financial imbalances and how the situation would develop," another member said, highlighting lingering concerns over the side effects. Jiji Press