Policymakers divided on extra stimulus

Policymakers were sharply divided over expanding the Bank of Japan's huge monetary easing plan last month, with opponents warning that the risks far outweighed the possible benefits, minutes from the meeting showed on Tuesday.

The central bank surprised markets on Oct 31 by announcing it would inflate its asset-buying plan by up to 80 trillion yen ($676 billion) annually. The move was approved in a 5-4 vote of board members.

The decision, which came days after the US Federal Reserve wound down its own stimulus, has sent the yen plunging to lows against the dollar and euro not seen for years, while pushing equities to the levels reached before the global financial crisis.

Critics on the policy board questioned "the sustainability of its effects" and said the impact of fresh measures on the world's third-largest economy - and the BoJ's drive to hit a 2 percent inflation target - "would not be large". They also said it could "considerably" squeeze liquidity in the market for Japanese government bonds.

One member warned that the yen's weakness will batter small domestic firms amid soaring import costs.

The four board members opposed were Koji Ishida and Yoshihisa Morimoto, both former business executives seen as loyal to bank chief Haruhiko Kuroda, and economists Takehiro Sato and Takahide Kiuchi.

The close call suggested that Kuroda - who was handpicked by Prime Minister Shinzo Abe as part of a wider plan to kick-start the economy - almost became the first BoJ chief to lose a vote on a policy that he backed, according to Dow Jones Newswires.

But one member who supported the move said: "These measures were expected to produce stronger effects on corporate profits, employment and wages than in the past."

AFP

(China Daily 11/26/2014 page11)