19 July 2005, 11:25  Minutes of metting Bank of Japan of the 14-15 June

The Bank of Japan's policy board voted down in mid-June two to cut its liquidity target, including one proposal to reduce it to just 25 trln yen, the minutes of the June 14-15 meeting show. Board member Toshikatsu Fukuma proposed cutting the target range for liquidity -- or for the outstanding balance of current account deposits by commercial banks at the central bank -- to 27-32 trln yen, according to the minutes, which were released today That proposal was defeated by a vote of 8-1, with only Fukuma voting for it Another member, Atsushi Mizuno, proposed cutting the liquidity target even further, to 25-30 trln yen, the minutes show That proposal was also defeated by a vote of 8-1, with only Mizuno voting in favour The nine-member board voted for the second straight time to maintain the liquidity target at 30-35 trln yen, but to tolerate the actual amount temporarily falling below the minimum when market conditions warrant The vote to maintain that stance was 7-2, with Fukuma and Mizuno voting against that policy, according to the minutes Fukuma dissented for three reasons Demand for liquidity was declining. Because it was, maintaining a huge oversupply of funds risked hindering the restoration of proper market functioning and could erode financial market discipline. And it was still possible to support the economic recovery and overcome deflation by maintaining the zero interest rate environment based on the central bank's commitment in terms of policy duration, the minutes said Mizuno also dissented for three reasons, including the first two reasons cited by Fukuma. As a third reason, Mizuno argued that it was already fully understood that lowering the target range would merely be a response to the decline in liquidity demand among financial institutions, and lowering it would make the guideline for money market operations clearer. But the majority agreed, as in the previous meeting, that given the continuing slight decline on a year-on-year basis in overall consumer prices, the Bank of Japan should firmly maintain the current framework for its quantitative easing policy "Many members expressed the view that if the bank made a change in the guideline for money market operations when Japan's economy was at a temporary pause, there was a risk that it would be misinterpreted as a weakening of the bank's stance of maintaining the monetary easing," the minutes said

© 1999-2024 Forex EuroClub
All rights reserved