The Bank of Japan officials said the central bank should continue its ultra-loose monetary policy; however, it should carefully watch the rising cost of prolonged easing.
Some representatives of the Board of Governors believe that the regulator should ensure that the country does not see deterioration of economic and financial conditions.
The BOJ has failed to achieve its 2% inflation target and this is a worrying signal for analysts.
Earlier, at a meeting on June 14-15, the Bank of Japan decided to leave its monetary policy unchanged. The regulator also lowered its inflation assessment. Policymakers maintained interest rates at -0.10%, with the 10-year yield target left at around zero percent.
According to experts, low inflation requires the regulator to maintain large-scale stimulus, despite the side effects, including a drop in banks' profits from low interest rates. One member of the Board of Governors believes that the regulator should guide inflation toward its target through steady improvements in the output gap and inflation expectations.
The Bank of Japan is buying government bonds and other risky assets, including ETFs, within the framework of its asset-purchase program. Some board members urge to consider possible negative consequences of the purchases.
In May 2018, Japan’s core inflation was estimated as restrained, far from reaching the target of 2%. Consumer prices excluding the cost of food rose by only 0.7% year-on-year. Earlier, the indicator declined for two months in a row.
The next meeting of the Bank of Japan is scheduled for the end of July 2018. During this period, updated forecasts on inflation and economic growth are expected.
