BOJ shared on motivational tweaks like fear of pandemic

TOKYO (Reuters) – Bank of Japan (BOJ) policymakers have been divided on how far to go in tweaking its stimulus program, with some calling for a review of their inflation strategy 2 % achieved, a summary of comments expressed at the December rate review showed.

The policy review will focus on tweaking the BOJ’s purchase of traded funds (ETFs) and operations to control the yield curve, according to the minutes of the Dec. 17 to 18 meeting released Monday.

BOJ Governor Haruhiko Kuroda has said the policy review will not bring major changes to implement loop control (YCC) and instead focus on tuning the framework to make it more sustainable.

But some BOJ board members called for a more ambitious review as the hit to growth from COVID-19 fears a return to deconstruction, the summary showed.

“The BOJ needs to reconsider a comprehensive assessment of what strategy should be taken in meeting its price target,” said one of the nine members.

“To avoid a return to defaults, the BOJ should evaluate its strategy, tools and communications for achieving its pricing target,” another comment said. in the summary.

In December, the BOJ extended the deadline for measures to reduce funding pressures for companies hit by COVID-19. It also unveiled a plan to seek ways to make its policy more sustainable, as the pandemic pushes prices further away from the 2% target.

Some members said the BOJ could make its ETF purchases more flexible, so that it can sustain the program for a long time and ramp up buying if markets turn volatile, the summary showed.

Others saw room for tweaking the work of the YCC as by trying to control output “more carefully” and allowing a moderate reduction in the output curve, he pointed out.

Under the YCC, the BOJ manages short-term interest rates at -0.1% and 10-year bond yields around zero through large bond purchases.

It also buys large amounts of ETFs and other risky assets, a policy that has drawn criticism from some investors for shifting prices away and drying up market liquidity.