Bank of Japan minutes show the concern of “a few” board members that inflation expectations may fail to flow through to actual price increases, leaving the BOJ short of its 2 percent goal through March 2016.
Those policy makers say it’s “highly uncertain whether changes in inflation expectations would lead to a rise in the actual rate of inflation,” according to the record of an April 26 meeting, released today in Tokyo. According to JPMorgan Chase & Co., the BOJ uses the term “a few” to mean two.
Japanese stocks tumbled today, adding to volatility that threatens to sap confidence in Prime Minister Shinzo Abe’s campaign to revive the world’s third-biggest economy. The Topix Index fell 3 percent as of 10 a.m. local time, adding to a 6.9 percent one-day plunge last week that was the biggest since the March 2011 earthquake and tsunami. The gauge is still up 35 percent for the year to date.
Before today’s minutes, the BOJ had already disclosed that at least two members see inflation of less than 1 percent in the fiscal year ending March 2016. The board’s median estimate is 1.9 percent, excluding the effects of a planned sales tax increase.
Board members discussed perceptions of a contradiction between applying downward pressure to interest rates through large-scale purchases of government bonds and seeking to fuel inflation, which would lead to pressure for higher yields. “A few” members said this had led to fluctuations in financial markets. One said that potential instability remained in the bond market.