Bank of Japan tweaks message as dissenter calls for more easing

Bloomberg

A new dissenter on the Bank of Japan board calling for more stimulus has prompted the BOJ to adjust its communications to flag risks of additional eas-
ing, according to people familiar with the central bank’s discussions.
The change in messaging could explain why some investors wrongly interpreted Governor Haruhiko Kuroda’s recent comments on the “reversal rate” theory as a hint about an earlier policy exit, said the people, who asked not to be named because the discussions are private.
The calls for further easing by Goushi Kataoka, a reflationist who joined the board in July, raised the need to explain the reasons for not adding stimulus despite the price target remaining elusive, the people said. Kataoka became the first dissenter to call for more aggressive stimulus than the rest of the board since Kuroda took the helm in 2013.
The yen weakened 0.2 percent against the US dollar immediately after Bloom-
berg reported the adjustment to the BOJ’s messaging. It later retraced the move
and traded at 112.18 versus the dollar at 3:15 p.m. in Tokyo.
Many BOJ officials see the current yield curve as best for Japan’s economy for now, given that inflationary pressures are gradually rising while low yields are not disrupting the financial system, the people said. The BOJ has consistently said it will continue its powerful easing program because its 2 percent inflation target remains distant, they noted.
Former board members Takahide Kiuchi and Takehiro Sato, whose terms ended in July, consistently voted against board decisions, but they argued that the stimulus was excessive.
Kuroda’s comments on the “reversal rate,” first mentioned by name in a mid-November speech, were meant to reaffirm the risks of additional easing, while making clear that those risks had not been realised, according to the people.