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Investors weighing the odds of more easing from the Bank of Japan should pay attention to what board members didn't say at the BOJ's latest meeting, omissions that suggest there are now fewer obstacles to adding stimulus.
In previous meetings, members of the board offered arguments often interpreted as reasons for not taking action. Members have said, for example, that the BOJ shouldn't overly emphasize short-term changes in the economy or inflation. At least one member, at July's meeting, said that the BOJ had already pumped more stimulus into the system than other central banks, another comment seen as weighing against additional action.
But those hints of caution were conspicuously absent at the BOJ's Sept. 18-19 meeting, a summary of opinions from the meeting released Monday by the bank shows, adding to signs that the board is tilting in favor of easing. The Federal Reserve and the European Central Bank have both cut rates in recent weeks.
BOJ Governor Haruhiko Kuroda, speaking a few days after the last policy meeting, said that cutting interest rates, which are already negative, was an option.
The summary shed some light on how the debate around negative interest rates has shifted. One member said the board should judge the impact of lowering the key rate by looking at the overall economy, not just at the effect on banks, a comment that hasn't appeared in previous records of BOJ discussions. But another member said prolonged low-interest rates could cause lenders to be downgraded by credit agencies, making business even tougher for them.
The BOJ raised speculation it may ease as soon as next month when it said it will look carefully at whether the global slowdown has the potential to kill off price momentum in Japan. Still, Kuroda has said the BOJ has no preconceptions about what it will do at its Oct. 30-31 meeting.
To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net
To contact the editors responsible for this story: Malcolm Scott at mscott23@bloomberg.net, Jason Clenfield, Paul Jackson
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