The Bank of Japan discussed the risks of raising interest rates too late at its meeting in April via Reuters

by Leika Kihara

June 21 (Reuters) – The report showed that the Bank of Japan’s monetary policymakers agreed to keep interest rates very low at the first meeting of Governor Kazuo Ueda, but some saw the need to avoid raising them too late. Revised review for the month of April.

As Japan was making progress toward the central bank’s 2% inflation target, the nine board members saw the need for very loose policy given uncertainty about the global economy and wage outlook, the minutes report.

However, one member said the Bank of Japan should ensure its policy “doesn’t lag behind” as wages and inflation are already showing signs of accelerating.

Another member said the Bank of Japan should avoid a situation where it has to make sudden changes in interest rates, because that would cause huge disruption to companies accustomed to very low rates.

The second member said: “The Bank of Japan should humbly observe the development of prices and wages, and not respond too quickly, but not too slowly.”

At the April meeting, the Bank of Japan made no changes to its Yield Curve Control (YCC) policy, including targeting -0.1% for short-term interest rates, and an implied 0.5% cap for 10-year bond yields.

Many members did not consider it necessary to change the operating behavior of YCC, arguing that the yield curve distortions observed in the past had recovered, according to the minutes.

However, a member said the Bank of Japan may consider reviewing the YCC’s conduct as many market players have complained that the Japanese government bond (JGB) market remains underperforming, according to the minutes.

“On this basis, the member said that yield curve control appears, in some respects, to have hindered smooth financing and the Bank may consider reviewing its behavior at this point. However, it would have been prudent to wait a little longer until given the state of the global financial markets,” referred to in the record.

The Bank of Japan does not disclose the identity of the members who made the comments in the minutes. Earlier this year, Board Member Naoki Tamura publicly advocated the need to weigh the pros and cons of the YCC Board of Directors.

(Reporting by Lika Kihara; Editing in Spanish by Ricardo Figueroa)