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Economy

Doubt over 2% inflation target grows within Bank of Japan

Minutes from July meeting show concerns over easing's side effects

 The BOJ decided it was time to address side effects from its monetary easing policy.   © Reuters

TOKYO -- Skepticism is growing within the Bank of Japan about achieving the 2% inflation target, with many policy board members more focused on ensuring economic stability by addressing the side effects of the central bank's massive easing campaign. 

"In continuing with powerful monetary easing, we now need to consider both its positive effects and side effects in a balanced manner," BOJ Gov. Haruhiko Kuroda said in a speech Tuesday in Osaka, echoing that sentiment.

Kuroda acknowledged that tweaks in monetary policy adopted in July were in line with that thinking. The BOJ's policy-setting board decided that month to let long-term rates to rise to around 0.2%, allowing a wider range of movement.

Many board members called for measures to minimize easing's side effects at the meeting, according to minutes released Tuesday. The majority of the members stressed the need to secure the stability of the economy and the financial system, objecting to pushing for the inflation target at all cost.

Japan's employment figures and corporate earnings have improved since Kuroda enacted his muscular easing policy five years ago, yet they have not produced sharper increases in consumer prices. The governor described the economic and price developments as "somewhat varied," expressing frustration at the stubborn deflationary conditions.

On the escalating trade war between the U.S. and China, Kuroda raised concerns about the negative impact on the global economy during his speech Tuesday.

"It is clear that protectionist policies will not benefit any economy, regardless of whether it adopts such policies," he said.

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