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New BOJ Members Sought More-Expansionary Wording

November 26, 2012

Takehiro Sato And Takahide Kiuchi

Takehiro Sato, former chief economist at MUFJ Morgan Stanley Co., left, and Takahide Kiuchi, former chief economist at Nomura Securities Co., pose in undated handout photographs provided to the media. Source: MUFJ Morgan Stanley Co. (Sato) and Nomura Securities Co. (Kiuchi) via Bloomberg

Two new members of the Bank of Japan (8301)’s nine-person policy board voted for a more expansionary wording of the bank’s price outlook released at its Oct. 30 meeting, minutes of the session show.

Takehiro Sato and Takahide Kiuchi voted for phrasing that aggressive easing should continue until a 1 percent inflation goal “has been steadily maintained,” according to a summary released in Tokyo today. The proposal suggested by Sato was defeated by majority vote and the bank kept language that it will continue “powerful easing until it judges the 1 percent goal to be in sight.”

The minutes highlight the two members’ expansionary stance on easing as a shrinking economy and election next month encourage politicians to press the central bank for more aggressive action to spur growth and counter deflation. The BOJ expanded its asset-purchase program at the Oct. 30 meeting for the second time in two months, and is expected to ease further after the Dec. 16 poll, according to a Bloomberg News survey.

“The government is unable to add much fiscal stimulus because of budgetary constraints,” said Takahiro Sekido, a strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. who formerly worked at the central bank. “So it will press the BOJ for more easing.”

Sato is a former Tokyo-based economist at Morgan Stanley MUFG Securities Co. and Kiuchi worked for Nomura Securities Co. The pair joined the board in July.

Weaker Yen

The yen strengthened 0.2 percent to 82.23 per dollar as of 4:31 p.m. in Tokyo after reaching a seven-month low last week. The Nikkei 225 Stock Average (NKY) closed up 0.2 percent for its third day of gains. The gauge has risen more than 8 percent since Nov. 14, when Prime Minister Yoshihiko Noda called for a Dec. 16 election, triggering speculation the opposition may win and call for more monetary easing.

BOJ Governor Masaaki Shirakawa in a speech today repeated the bank’s pledge to continue powerful easing until the 1 percent inflation goal is in sight. He said the bank is concerned the appreciation of the yen could adversely affect Japan’s economy through a fall in exports and corporate profits, as well as through a deterioration in business sentiment.

“We still want the yen to weaken more and more,” Toshio Mita, chairman of Chubu Electric Power Co. (9502) and also head of the regional economic federation, said at the meeting where Shirakawa spoke. “Corporate efforts are coming close to the limit” in dealing with the strong currency, Mita said.

Future Easing

The majority of the board will be more accommodative after April 2013 with the terms of the governor and his two deputies ending early next year, Sekido said.

Objections from Kiuchi and Sato show that “animated discussion is taking place” during the central bank’s board meetings, according to Shirakawa. “A monetary policy meeting is a procedure where nine board members exchange ideas, think and find the best policy for the Bank of Japan,” he told reporters today.

While the BOJ announced a 1 percent inflation target in February, consumer prices excluding fresh food fell for a fifth month in September and are expected to have declined further last month, according to the median estimate of analysts surveyed by Bloomberg News.

Shinzo Abe, leader of the opposition Liberal Democratic Party, who according to polls is likely to become the next prime minister, has said that the central bank should adopt unlimited easing and set an inflation target of as much as 3 percent.

To contact the reporter on this story: Andy Sharp in Tokyo at

To contact the editor responsible for this story: Scott Lanman at

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