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Economy

Board members wrangled over 'supplementary measures'

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Policy board members attend a monetary policy meeting where opposition to expanding the BOJ's purchases of exchange-traded funds was voiced.   © Kyodo

TOKYO -- Some Bank of Japan board members aired clear discontent over "supplementary measures" to the bank's unconventional monetary policy of quantitative and qualitative easing, a summary of a meeting held on Dec. 17-18 shows.

     The summary of the monetary policy meeting was released Friday in a new effort intended to smooth communications with the market. Under the program, each board member summarizes the opinions he or she presented at a meeting, then submits the outline to BOJ Gov. Haruhiko Kuroda. It is Kuroda's responsibility to then edit the opinions.

     More detailed minutes will be released after the next monetary policy meeting.

     Although no board member opposed the bank's assessment of the Japanese economy -- that it is continuing its moderate recovery -- the summary shows clear discontent with the "supplementary measures" the bank implemented during the meeting.

     During the meeting, the board decided to lengthen the average remaining maturity of the Japanese government bonds it purchases. It also announced an additional 300 billion yen for its exchange traded fund purchasing scheme. The added money is to target funds comprised of shares in companies that are "proactively making investment in physical and human capital."

     Kuroda said the steps were made to ensure that the government's stimulus program could be smoothly implemented and allow for its expansion, if needed. The decision was made in a 6-3 vote.

     Said one member: "The Bank should not extend the average remaining maturity of JGB purchases, because the extension could (1) decrease the stability of the Bank's JGB purchases, (2) increase the Bank's involvement in the government's debt management policy, and (3) prolong the period that would be required for normalization of monetary policy."

     Another member said central banks should refrain from engaging in industrial or social policies and that he/she "supports continuation of the current measures."

     A different member weighed in: "I am concerned that the introduction of supplementary measures would be counterproductive, as it would raise awareness about the limits of QQE and thereby make the Bank's communication with the market more difficult."

     The member was certainly right; doubts over the sustainability of the BOJ's extraordinary policy measures rocked the market after the announcement.

     One board member also pointed to the possibility of the QQE program being "in place for a longer period than previously expected."

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