25 January 2006, 11:20  BOJ Dec 15-16 Minutes: Discussed Various Price Data

Board members also actively debated the accuracy of various price data in gauging trends, touching on the core consumer price index, which is the BOJ's current benchmark for monetary policy, and the gross domestic product deflator, the government's preferred price indicator. BOJ officials have recently been signaling that a policy shift could be near, as the core CPI looks set to sustain gains and that conditions for ending the current quantitative easing policy are falling into place. One BOJ member pointed out that if the BOJ were to use the GDP deflator in gauging price trends, "it should take into account that it might be revised frequently and substantially with revisions of GDP statistics. On the CPI, one BOJ board member said that excluding components which tend to show a lot temporary fluctuation would make it easier to grasp the underlying trend. The core CPI currently excludes volatile prices of fresh foods. But many members, while noting that energy prices could be considered as one volatile factor, concluded "it was not appropriate to exclude (energy prices) because the recent rise in energy prices has been largely caused by an increase in the demand of emerging economies and thus was not necessarily a temporary factor." The comments came at a time when the government, in a thinly veiled move to slow the BOJ's hand in ending its current ultra-easy policy, said it was working to compile a new set of CPI data minus food and energy prices. The data was released later that month and showed prices fell in November, even though the core CPI turned up. But representatives from the government present at the December meeting continued to keep pressure on the BOJ by stressing deflation continued. An official from the Cabinet Office said he hoped the central bank would look at price indicators other than the core CPI, such as the GDP deflator, when judging price trends. "Furthermore, the government would like the Bank to consider presenting a desirable price level," to stabilize market expectations and contribute to overcoming deflation, the Cabinet Office official said. The official from the Ministry of Finance said that the ministry "would like the BOJ to carefully explain to the market and the public that it will persevere with the current quantitative easing policy."

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