BoJ Minutes

Following up on my post about the possibility of moves towards ending quantitive easing in Japan, the BoJ has now published its minutes. The vote was in fact 8-1 against, with Fukuma being the only one in favour. Of course there was some nebulous commitment to ending the easing at some appropriate time in the future. Ok, I guess, what else is new?

"The Bank of Japan Policy Board's Toshikatsu Fukuma was the sole member who voted against maintaining the central bank's funds target at a policy meeting on April 5-6, minutes showed on Wednesday. Fukuma proposed lowering the current account deposits target to 27-32 trillion yen ($251-297 billion), which was rejected by a vote of 8-1. The board decided to keep the target at 30-35 trillion yen.

But the minutes said two members said cutting the target in future could be considered, and one member said the board should not rule out a future review of conditions for ending the "quantitative easing" policy.

At the latest monetary policy meeting, which ended last Friday, the BOJ tweaked its super-easy stance, saying the funds could temporarily fall below the target range if demand was weak. ($1=107.58 yen)"

Mind you according to MS's Takehiro Sato, the real underlying isssue isn't that they believe there will be an early an orderly return to inflation, but that maintaining these levels of liquidity (which he estimates to be five times the quantity needed simply to underpin a zero rate) is presenting tecnical difficulties: the thing is there is proportionately very little demand for loans, and this makes bulking up the monetary mass difficult.

He even speculates that they might be lead to step up the Rimban operations (where the BoJ buys JGB's). Now since the JGB's could themselves become paper issue of questionable value at some stage, (Japan's accumulated deficit remember, climbs and climbs regardless) you have to really worry about long term balance sheet issues at the BoJ.