TOKYO (Reuters) – Bank of Japan (BOJ) policymakers agreed on the need to focus on keeping interest rates stably low while the economy remains under the strain caused by the COVID-19 pandemic, minutes of the central bank’s March meeting showed on Thursday.
With state-of-emergency curbs to contain the pandemic hurting consumption and keeping deflation risks alive, the nine board members agreed there was “extremely high uncertainty” over the outlook, according to the minutes.
One member said the risk of deflation was still bigger than that of inflation for Japan, as wages and inflation expectations remain on a weak note.
“Some members said while the beginning of vaccine rollouts was a positive sign, developments regarding the pandemic continue to warrant attention,” the minutes showed.
The remarks underscore the BOJ’s resolve to maintain its massive stimulus as slow vaccine rollouts and a fourth wave of infections cloud prospects for a solid economic recovery.
At the March review, the BOJ kept policy steady and unveiled steps to make its tools sustainable enough to weather a prolonged battle to hit its 2% inflation target.
As part of the moves, the BOJ allowed long-term rates to fluctuate more widely around its 0% target to breathe life back to a market made dormant by years of heavy bond buying by the central bank.
Some board members stressed the need to remind anew the BOJ’s view that excessive falls in super-long bond yields could hurt economic activity in the long run, the minutes showed.
“With this in mind, the board members agreed the priority should be to keep the entire yield curve stably low while the impact of the pandemic continues,” the minutes showed.
One member voiced hope the current framework, made more sustainable with the March steps, would serve as the basis for the BOJ’s easing in the coming years, according to the minutes.
Japan is lagging other major economies in staging a strong revival from the pandemic’s hit. An expected rebound in April-June growth is clouded by a spike in infections that may trigger an extension to state-of-emergency curbs.
(Reporting by Leika Kihara; Editing by Chang-Ran Kim and Christopher Cushing)
