May 22, 2024 6:37 pm
BOJ board split on economy’s strength post stimulus exit, March summary reveals

The Bank of Japan held a meeting in March to discuss whether the economy was strong enough to handle an exit from its ultra-loose monetary policy. However, policymakers were divided on this issue, leading to a delay in the next interest rate hike. The BOJ recently made a historic shift away from its focus on reflating growth with massive monetary stimulus, ending eight years of negative interest rates and other unconventional policies.

During the meeting, some policymakers argued that recent data, such as significant wage hikes from large companies, justified ending ultra-loose policy since the bank was closer to its 2% inflation target. However, others believed that further examination was needed to determine if wage gains would spread to smaller firms and if rising labor costs were affecting services prices. One member emphasized the importance of a cautious stance even after ending negative rate policy, as the economy may not require rapid interest rate hikes.

The decision to exit ultra-loose policy at the March meeting was made by a 7-2 vote, with Asahi Noguchi and Toyoaki Nakamura dissenting. The summary of opinions suggests that policymakers are closely monitoring the economic situation to determine the right timing for future interest rate hikes.

In conclusion, while some policymakers at the Bank of Japan meeting believed that recent data justified ending ultra-loose policy since the bank was closer to its 2% inflation target, others stressed the need for further examination before making any decisions about future interest rate hikes. The decision to exit ultra-loose policy at the March meeting was made by a narrow margin, with only two dissenting members voting against it. As such, policymakers remain closely monitoring the economic situation before making any decisions about future monetary policy actions.

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