BOJ Worried About Yen's Advance Weeks Before Loosening Policy Last Month
Sept. 10 (Bloomberg) -- Curtis Freeze, chief executive officer of Gro-Bels Co., a Tokyo-based property developer, and chairman of Honolulu-based Prospect Asset Management Inc., talks about Japan's economy and the yen. Japan’s economy slowed less than initially estimated in the second quarter as companies boosted capital spending, indicating the nation’s recovery was intact before a surge in the yen threatened to stunt export gains. Freeze talks with Linzie Janis from Tokyo on Bloomberg Television's "Global Connection." (Source: Bloomberg)
Bank of Japan board members last month were already growing concerned that a strengthening yen may hurt the economy, three weeks before the central bank loosened monetary policy.
“Many members raised the possibility that the appreciation of the yen might depress growth in exports and corporate profits,” minutes of an Aug. 9-10 meeting published today in Tokyo showed. They said the bank needs to watch whether confidence will be damaged if the yen strengthens further and causes share prices to fall, according to the minutes.
BOJ board members kept policy on hold at the meeting even as the yen approached a 15-year high and threatened to derail Japan’s export-led expansion. The bank convened an emergency session on Aug. 30 and expanded a bank-loan program to inject more liquidity.
“The yen’s gain and stocks’ slump were already visible at the time of the August regular meeting,” Naomi Hasegawa, a senior debt strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo, said before the minutes were published. “But the central bank forewent any action, sticking to its wishful outlook of the economy.”
Governor Masaaki Shirakawa this week told parliament the central bank will implement additional easing measures should downside risks to growth materialize and the economy worsens more than the bank’s outlook. The bank is examining “various” policy options and will take action if judged as necessary, he said.
Strengthening Yen
The Japanese currency has advanced 1.6 percent against the dollar and the Nikkei 225 Stock Average has tumbled 2.9 percent over the past month amid concerns that slowing global growth will hurt foreign demand for Japanese products.
A stronger yen could speed up companies’ shifting production overseas, some BOJ board members said, according to the minutes.
One unnamed member said an appreciating currency had some benefits, making it cheaper to buy imported materials and acquire foreign firms, the minutes showed.
Overall, “members agreed that developments in foreign exchange markets and the effects on Japan’s economic activity continued to warrant close attention,” the minutes said.
Growth Slowdown
The BOJ this week said the pace of Japan’s expansion will temporarily slow, while keeping its overall assessment that signs of a moderate recovery are appearing. Growth in exports and production has been decelerating and consumer spending could also decline as the effects of government stimulus steps fade, the bank said.
“It seems the BOJ is already acknowledging the economy is getting worse than it has anticipated,” said Mari Iwashita, chief market economist at Nikko Cordial Securities in Tokyo. The bank will explore additional easing measures through late October, when it updates a semi-annual economic outlook report to be published on Oct. 28, she said.
Some BOJ board members predicted that the pace of the recovery might temporarily slow due to a waning of policy effects in the latter half of the year ending March 31, the minutes showed.
Japan’s gross domestic product rose at an annualized 1.5 percent rate in the three months ended June 30, faster than the 0.4 percent reported last month, a Cabinet Office report showed today in Tokyo.
U.S. Economy
The U.S. economy was also a topic of concern at the BOJ policy board meeting, with a few members saying that some figures indicate a slowing recovery and downside risks. A few members “expressed their increased awareness of downside risks” about the world’s largest economy, minutes show.
To contact the reporter on this story: Mayumi Otsuma in Tokyo at motsuma@bloomberg.net
Rate These Stories
Rate this Page