The Bank of Japan kept its monetary stimulus unchanged Thursday, but a dovish new board member opposed the decision in his first meeting, an unexpected dissension on a board chosen entirely by Prime Minister Shinzo Abe.
Still, BoJ Governor Haruhiko Kuroda and his board left its target interest rates and asset purchase program unchanged, a decision expected by all 45 economists surveyed by Bloomberg. The vote was 8-1, with Goushi Kataoka objecting.
Kataoka argued that there was little chance of reaching the BoJ’s inflation target by the projected time frame of around fiscal 2019, according to the central bank’s policy statement. He said the effects of the current yield curve program weren’t strong enough, though inflation was likely to continue rising for the time being due to oil prices and foreign-exchange rates.
The BoJ statement didn’t mention any policy suggestions from Kataoka, an economist who advocates expansionary fiscal and monetary policies. In November 2016, he argued that the BoJ should have expanded its easing, just two months after the implementation of the yield curve control program.
He said fiscal policy should play a greater role in revitalizing the economy and supports shelving a sales-tax increase planned for October 2019.
Kataoka, formerly with Mitsubishi UFJ Research and Consulting Co., and former private-sector banker Hitoshi Suzuki replaced two staunch dissenters on the board in July.
Reviving Debate
Opposing board members haven’t stopped Kuroda from advancing radical stimulus measures in the past. Some analysts had expressed concern that a loss of dissenting views on the board would end robust discussion. Kataoka’s position that the BoJ is not on course to reach its goals may revive debate in an unexpected manner.
BoJ watchers increasingly expect the central bank to stay the course at least through the end of Kuroda’s current term in April, even as the balance sheet nears the size of Japan’s economy. That leaves Japan’s central bank increasingly out of step with its global peers and means an ever-growing balance sheet.
“The results of the meeting were as expected,” said Junko Nishioka, chief economist for Japan at Sumitomo Mitsui Banking Corp. “The fact that Kataoka threw in a dissenting vote was a surprise, but I believe his stance is not that he’s against the easing policy itself, but rather that the volume of the measures is lacking.”
