BoJ: Dissent brewing? - ING

The main excitement surrounding the BoJ, arguably one of the least remarkable central banks in the G-7, was the dissent at the last meeting by the newly appointed member, G Kataoka, points out the research team at ING.

Key Quotes

“He dissented on the grounds that even the combination of negative interest rates, and even with QE targeting approximately zero yields on 10Y Japanese Government bonds (JGBs), the 2.0% inflation target was unlikely to be reached.”

“BoJ Board Member Goushi Kataoka is almost certainly right in our view. The real question is, “Does it matter?”. Since it emerged from outright deflation, inflation in Japan has run well below 2.0% except for brief moments of tax-induced one-off inflation, and it seems none the worse for that. And while there may be some signs of inflation life, that increase is mainly coming from the notoriously fickle elements of food and fuel.” 

“The Japanese economy does seem to be very slowly improving. Growth has been nearly 1.0% or more for six consecutive quarters. Since last month, we don’t think that anything has changed significantly enough for Kataoka to stop dissenting, though that also seems likely to be the case for the next year at least.”

“We wonder if constant dissenting may in time either become boring for Kataoka, who may throw in the towel and join the consensus, or others may be persuaded that he is right, and voices swell for more aggressive easing action. Neither seems likely at the next meeting and another 8-1 seems probable.”