(Bloomberg) -- Bank of Japan board members meeting in September highlighted the need to enhance communications with financial markets, while some members stressed the importance of staying wary of downside risks, according to a summary of opinions from the discussion.
“When conducting further policy interest rate hikes, the bank will need to communicate its policy stance and other factors to markets more carefully,” one of nine policy board members said at the September 19-20 meeting, according to the summary.
The summary suggests that the BOJ will endeavor to send clearer hints before raising its benchmark rate again after the July 31 hike was criticized for precipitating market ructions that included the biggest tumble in the Nikkei 225 in its history.
Investors are trying to assess whether the bank might try to back away from its reputation for surprises now that the board has begun to normalize policy since March. The initial reaction to the comments suggests market players were focusing on the BOJ’s reiteration of having scope to wait and assess the economy before moving again. The yen weakened against the dollar and benchmark bond yields fell a tad.
The rare intensive discussions over BOJ’s communications at a policy meeting also indicate that Governor Kazuo Ueda’s recent remarks that the bank has time to consider its next policy move were a deliberate signal meant to hint at little chance of a policy shift this month.
Several opinions in the summary called for cautiousness over the global economy and financial market. That’s in line with Ueda’s speech last week that stressed the need for keeping a close eye on whether the Federal Reserve will manage to bring the US economy into a soft landing after embarking on an easing cycle last month.
“Uncertainties regarding Japan’s economy have heightened with growing downside risks to the global economy,” one member said, according to the summary, which doesn’t disclose who said what. “In order to avoid surprising the markets, it is important for the bank to increase public awareness that the Bank’s conduct of monetary policy is data-dependent.”
Most BOJ watchers expect authorities to pause for now after the market turmoil of early August, and as they navigate uncertainties related to the US economy and political transitions in both Japan and the US. Japan will hold a national election on Oct. 27, a few days before the BOJ’s next policy meeting. Many economists foresee a rate move in December or January.
“In conducting monetary policy, it will be necessary for the bank to give due consideration to downside risks to Japan’s economy and monitor data carefully,” one member said, according to the summary.
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