BOJ divided on stimulus tweaks as pandemic stokes deflation fears Leika Kihara




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TOKYO (Sundiata Post) – Bank of Japan (BOJ) policymakers were divided how far to go in tweaking its stimulus programme, with some calling for an overhaul of its strategy for achieving 2% inflation, a summary of views voiced at December rate review showed.

examination will focus tweaking BOJ’s purchases of exchange-traded funds (ETF) and operations for controlling yield curve, according to summary of the Dec. 17 to 18 released Monday.

BOJ Haruhiko Kuroda has said the review will not lead to big changes to yield curve control (YCC) and instead focus fine-tuning the framework to make it sustainable.

But some BOJ board called for a ambitious review as the hit to growth from stokes fears of a return to deflation, the summary showed.

“The BOJ conduct a renewed comprehensive assessment on what strategy it should take in achieving its price target,” one of the nine said.

“To avoid a return to deflation, the BOJ should assess its strategy, tools, and communication for achieving its price goal,” another opinion quoted in the summary showed.

In December, the BOJ extended the deadline for steps to ease funding strains for firms hit by . It also unveiled a plan to ways to make its sustainable, as the pandemic pushes prices further away from the 2% goal.

Some said the BOJ could make its ETF purchases more flexible, so it can sustain the programme for a prolonged period and ramp up buying if markets turn volatile, the summary showed.

Others saw room to tweak the YCC’s operations such as by seeking to control yields “more carefully” and allowing for a moderate steepening of the yield curve, it showed.

Under the YCC, the BOJ guides short-term interest rates at -0.1% and 10-year bond yields around zero massive bond buying.

It also purchases huge amounts of ETFs and other risky assets, a policy that has drawn criticism from some investors for distorting pricing and drying up market liquidity. (Rauters)