Not to be released until 8:50 a.m.
Japan Standard Time on Monday,
June 24, 2024.

June 24, 2024
Bank of Japan

Summary of Opinions at the Monetary Policy Meeting1,2
on June 13 and 14, 2024
I. Opinions on Economic and Financial Developments
Economic Developments
Japan's economy has recovered moderately, although some weakness has been seen in part. Itis likely to keep growing at a pace above its potential growth rate, as a virtuous cycle fromincome to spending gradually intensifies.

Although some of the latest data show relatively weak developments and some information
has raised concerns, the following main scenario remains unchanged: a virtuous economic
cycle is expected to be supported from the income side by significantly high levels ofcorporate profits and by the highest level of wage growth in around three decades, achievedin the annual spring labor-management wage negotiations. In addition, price indicators havebeen on track.

Private consumption lacks momentum, as high prices have affected daily shopping andconsumer sentiment. Close attention needs to be paid to the extent to which wage hikes andthe government's measures push up private consumption.

Regarding regular employees of small and medium-sized firms and pensioners, increases intheir wages and pensions may not catch up with the rise in prices for the time being.
Meanwhile, increases in wages for non-regular employees and for regular employees of large
firms can be expected to be equal to or greater than the rise in prices. Attention is warrantedon the effects of these wage developments on private consumption.

English translation prepared by the Bank's staff based on the Japanese original.
"Summary of Opinions at the Monetary Policy Meeting" is made through the following process: (1) each
Policy Board member and government representative makes a summary of opinions that she/he presented
at the Monetary Policy Meeting (MPM) under a certain word limit and submits this to the Governor of theBank of Japan, who serves as the chairman of the MPM, and (2) the chairman edits those opinions as hisresponsibility.
121The recent deterioration in consumer sentiment is due to an increase in upside risks to prices.

The profitability of small and medium-sized firms has been weaker than that of larger firms,
which has improved significantly compared with pre-pandemic levels. Investment and wage
growth of small and medium-sized firms have also been low. Given certain structural issues
in Japan -- such as the declining birthrate and aging population -- and the decline in its
international competitiveness, to realize a virtuous cycle between wages and prices, it isnecessary to create a growth spiral through the following: growth-oriented small,medium-sized, and larger firms boost their investment while strengthening their businessstructures, and startups make great advancements, so that all these firms attract funds andtalent.

Prices

Underlying inflation, measured by the consumer price index (CPI), is expected to increase
gradually. In the second half of the projection period, it is likely to be at a level that isgenerally consistent with the price stability target.

Although a virtuous cycle between wages and prices is developing, underlying inflation has
not yet reached 2 percent, taking into consideration the nominal wage growth rate, inflation
expectations, the rate of increase in services prices, and other factors.

It is difficult to say at this time that the results of this year's annual spring labor-management
wage negotiations have been reflected enough in wage statistics. That said, given that thecorporate goods price index and the services producer price index have risen, steady progresshas been made toward achieving the price stability target.

Prices have been developing in line with the outlook presented in the April 2024 Outlook for
Economic Activity and Prices (Outlook Report). They are likely to continue rising, affectedby an increase in import prices, tight labor market conditions, and high shipping costs due tothe so-called 2024 problem in Japan's logistics sector.

For the virtuous cycle between wages and prices to intensify steadily amid price rises
accompanying the yen's depreciation, it is important that there be progress in thepass-through of cost increases to selling prices by small and medium-sized firms and that thenominal wage growth rate increase further.

2At this point, it is unlikely that the increase in import prices will bring about a pass-throughof cost increases to consumer prices as seen from 2022 onward. That said, another wave of
price hikes may occur toward the second half of 2024, since it has become easier for firms topass on cost increases to selling prices, partly due to a shift in the norm in which they keep
prices unchanged.

II. Opinions on Monetary Policy
If the outlook for economic activity and prices presented in the April Outlook Report will be
realized and underlying inflation will increase, the Bank will raise the policy interest rate andadjust the degree of monetary accommodation.

While price developments have been in line with the Bank's outlook, there is a possibility thatprices will deviate upward from the baseline scenario if another pass-through of recent cost
increases to consumer prices happens. It is therefore necessary for the Bank to consider
whether further adjustments to monetary accommodation are needed from the perspective ofrisk management.

Although price developments have been on track to achieve the price stability target of 2
percent in the second half of fiscal 2025, upside risks to prices have become more noticeable.
It is necessary for the Bank to continue to closely monitor relevant data in preparation for thenext MPM -- taking into account that the upside risks to prices have affected consumer
sentiment -- and if deemed appropriate, it should raise the policy interest rate not too late, inresponse to an increase in the likelihood of achieving the target.

Any change in the policy interest rate should be considered only after economic indicators
confirm that, for example, the CPI inflation rate has clearly started to rebound and mediumto long-term inflation expectations have risen.

While private consumption lacks momentum, there have been successive unexpectedsuspensions of shipment at some automakers. As the Bank needs to assess the effects of thesefactors, it is appropriate that it continue with the current monetary easing for the time being.

The depreciation of the yen increases the possibility of an upward revision to the outlook forthe inflation rate. From the standpoint of the risk-management approach, the appropriate,risk-neutral level of the policy interest rate should rise in reflection of the increased upsiderisks to prices.

3Developments in foreign exchange rates have a wide-ranging impact on economic activity,and if exchange rates continue to deviate from fundamentals, this will also affect the sounddevelopment of the national economy. On the other hand, since monetary policy affects not
only exchange rates but also wide aspects of people's daily lives and economic activity, it
must be conducted based on the overall picture of developments in economic activity andprices.



Monetary policy is conducted based on an assessment of the trend in prices and underlying
wage developments. It is not determined by short-term developments in foreign exchangerates.

The Bank should reduce its purchase amount of Japanese government bonds (JGBs) to ensurethat long-term interest rates will be formed more freely in financial markets. In doing so, it isappropriate for the Bank to make a sizeable reduction in the purchase amount in a predictablemanner, while securing flexibility to ensure stability in the JGB market.

Given the experience of a smooth exit from the yield curve control framework, the Bank candetermine the appropriate amount, pace, and framework for the reduction of JGB purchases
and reduce the purchase amount of JGBs without causing market disruption. It is better not todecide on a specific plan at this MPM but to collect views from market participants before
making a decision, in order to reduce the purchase amount of JGBs to a greater extent.

Given the Bank's intention regarding the changes to the policy framework in March, it isnecessary to decrease its presence in the market by reducing its purchase amount of JGBs.

Side effects of large-scale monetary easing have remained as issues. For example, (1) theBank has been an overwhelmingly big player in the JGB market and (2) it has held such alarge amount of JGBs that it would be difficult for other market participants to hold theminstead. Therefore, the Bank needs to normalize its balance sheet in a timely and appropriatemanner, while communicating with market participants.

Regarding the reduction in the purchase amount of JGBs, it is desirable to formulate amedium-term plan -- taking account of supply and demand conditions and improved
functioning in the bond market -- and reduce the amount according to the plan in astraightforward manner. Since it is necessary to set, for example, an optimal pace ofreduction, the Bank should take some time to discuss the plan carefully, including bycommunicating with market participants.

4

It is necessary to prepare gradually for a reduction in the purchase amount of JGBs after
assessing developments in economic activity, while communicating with market participants,
since such a reduction could push down the economy, depending on the timing of the startand the scale of the reduction.

The purpose of decreasing the size of the Bank's balance sheet is to reduce its increased
involvement in the market without exerting disturbing effects on it, and this should beconducted separately from monetary policy.

In reducing the purchase amount of JGBs, it is necessary to discuss a new market structurefrom a medium- to long-term perspective, bearing in mind what the structure of JGB holdings
should be in the future. In doing so, it is important to discuss a wide range of issues,
including the environment surrounding market participants.

In order to discuss the treatment of the Bank's exchange-traded fund (ETF) holdings, theBank needs to deepen its understanding of the funds' characteristics that affect the market -for example, that they are not individual stocks but investment trusts.

III. Opinions from Government Representatives
Ministry of FinancePrivate consumption lacks momentum, although positive developments have been observedin, for example, wage hikes and business fixed investment recently. In addition, thegovernment recognizes the risks concerning overseas economies.

The government will make further progress toward achieving both economic revitalizationand fiscal consolidation.

The government expects the Bank to conduct monetary policy as appropriate towardsustainable and stable achievement of the price stability target of 2 percent while closelycooperating with the government. Moreover, it expects the Bank to communicate effectively
with financial and capital markets, including through its dissemination of information.

Cabinet OfficeWhile taking all possible measures with regard to current economic management, thegovernment will work, with strong determination, toward reforms that enable a transition
away from an economy oriented toward cost cutting to a growth-oriented economy. The5

government as a whole will implement a new economic and fiscal plan once it has beenformulated.
The government expects the Bank to make appropriate judgements regarding the specifics ofmonetary policy operations. It also expects the Bank to continue to conduct monetary policy
as appropriate toward achieving the price stability target of 2 percent in a sustainable andstable manner while closely cooperating and exchanging views with the government.

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