Minutes of the Monetary Policy Meeting on October 31, 2005  : 日本銀行 Bank of Japan
Central bank: boj | Type: minutes | Date: 2005-10-31

Minutes of the Monetary Policy Meeting
on October 31, 2005
(English translation prepared by the Bank's staff based on the Japanese original)
December 21, 2005
Bank of Japan
A Monetary Policy Meeting of the Bank of Japan Policy Board was held in the Head Office of the Bank of Japan in Tokyo on Monday, October 31, 2005, from 9:00 a.m. to 12:46 p.m.
Policy Board Members Present Mr. T. Fukui, Chairman, Governor of the Bank of Japan
Mr. T. Muto, Deputy Governor of the Bank of Japan
Mr. K. Iwata, Deputy Governor of the Bank of Japan
Ms. M. Suda
Mr. S. Nakahara
Mr. H. Haru
Mr. T. Fukuma
Mr. A. Mizuno
Mr. K. G. Nishimura
Government Representatives Present Mr. I. Ueda, Senior Vice Minister of Finance, Ministry of Finance
Mr. J. Hamano, Director General for Economic and Fiscal Management, Cabinet Office
Reporting Staff Mr. E. Hirano, Executive Director (Assistant Governor)
Mr. M. Shirakawa, Executive Director
Mr. A. Yamamoto, Executive Director
Mr. H. Yamaguchi, Director-General, Monetary Affairs Department
Mr. S. Uchida, Senior Economist, Monetary Affairs Department
Mr. H. Nakaso, Director-General, Financial Markets Department
Mr. H. Hayakawa, Director-General, Research and Statistics Department
Mr. K. Momma, Deputy Director-General, Research and Statistics Department
Mr. A. Horii, Director-General, International Department
Secretariat of the Monetary Policy Meeting Mr. Y. Nakayama, Director-General, Secretariat of the Policy Board
Mr. T. Kozu, Adviser to the Governor, Secretariat of the Policy Board
Mr. K. Murakami, Director, Secretariat of the Policy Board
Mr. T. Kato, Senior Economist, Monetary Affairs Department
Mr. K. Kamiyama, Senior Economist, Monetary Affairs Department
The minutes of this meeting were approved by the Policy Board at the Monetary Policy Meeting held on December 15 and 16, 2005 as "a document which contains an outline of the discussion at the meeting" stipulated in Article 20, Paragraph 1 of the Bank of Japan Law of 1997. Those present are referred to by their titles at the time of the meeting.
I. Summary of Staff Reports on Economic and Financial Developments
A. Money Market Operations in the Intermeeting Period
The Bank conducted market operations in accordance with the guideline decided at the previous meeting on October 11 and 12, 2005.
The outstanding balance of current accounts at the Bank moved in the 32-35 trillion yen range
Reports were made based on information available at the time of the meeting.
The guideline was as follows:
The Bank of Japan will conduct money market operations, aiming at the outstanding balance of current accounts held at the Bank at around 30 to 35 trillion yen.
Should there be a risk of financial market instability, such as a surge in liquidity demand, the Bank will provide more liquidity irrespective of the above target. When it is judged that liquidity demand is exceptionally weak considering such factors as responses of financial institutions to the Bank's funds-supplying operations, there may be cases where the balance of current accounts falls short of the target.
B. Recent Developments in Financial Markets
Against the background of the Bank's provision of ample liquidity, the weighted average of the uncollateralized overnight call rate was at around zero percent. Interest rates on term instruments rose, particularly those maturing beyond the fiscal year-end, in response to an improved perception of the economy and market participants' view that the quantitative easing policy would be terminated earlier than previously expected.
Although expectations that Japan's economy would continue to recover remained strong, the Nikkei 225 Stock Average moved in the range of 13,000-13,500 yen, around the same level as at the time of the previous meeting, partly because U.S. stock prices moved within a certain range. Long-term interest rates remained more or less flat on the whole.
The yen depreciated to the 115-116 yen range against the U.S. dollar partly reflecting the fact that market participants continued to expect a wider interest rate differential between Japan and the United States. With regard to the yen's exchange rate against currencies of Japan's major trading partners, the nominal effective exchange rate was on a declining trend.
C. Overseas Economic and Financial Developments
The U.S. economy continued to expand. Household spending and business fixed investment continued to increase steadily and the employment situation was on a steady improving trend. Prices had recently recorded a high increase due to the rise in energy prices, and in terms of the basic trend, the inflation rate was increasing moderately. With regard to East Asian economies, in China both domestic and external demand continued to expand strongly. The NIEs and ASEAN economies continued to expand at a moderate pace on the whole, although negative effects of high energy prices could be seen in, for example, household spending in some economies.
In U.S. and European financial markets, long-term interest rates rose slightly. Stock prices in the United States moved within a certain range, while those in Europe weakened. In financial markets in many emerging economies, their stock prices declined and yield differentials between their sovereign bonds and U.S. Treasuries widened.
D. Economic and Financial Developments in Japan
1. Economic developments
Exports as a whole increased at a faster pace, rising by 3.3 percent in the July-September quarter on a quarter-on-quarter basis, with exports to China, which had been somewhat lacking in momentum, showing clear signs of a pickup, and exports of IT-related goods increasing noticeably.
In the corporate sector, corporate profits had remained at high levels and business fixed investment had continued to increase. According to the survey conducted by the Japan Finance Corporation for Small and Medium Enterprise in September, the proportion of small firms that had carried out business fixed investment was at a high level for both manufacturers and nonmanufacturers.
Industrial production decreased by 0.3 percent in the July-September quarter on a quarter-on-quarter basis. However, production seemed to be basically continuing its moderate increasing trend, given that the decline seemed to reflect statistical fluctuations in, for example, steel ships and that the production forecast index for October and November was at a very high level. Indices of Tertiary Industry Activity rose slightly by 0.3 percent in terms of the monthly average for the July-August period compared to that for the April-June quarter.
With regard to inventories, while the completion of inventory adjustments had been confirmed in industries related to electronic parts and devices, inventories increased in some other industries, such as materials. Inventories in the industrial sector as a whole had recently increased somewhat, although they remained low.
As for the employment and income situation, various indicators for labor market conditions continued to be on an improving trend. In private consumption, many indicators, including sales in the food services industry and sales at department stores, improved somewhat in September compared to the summer when many indicators showed slightly weak developments.
Domestic corporate goods prices had continued to increase against the background of the rise in prices of international commodities such as crude oil. Consumer prices (excluding fresh food, on a nationwide basis) had been declining slightly on a year-on-year basis, with a decrease of 0.1 percent in September. The year-on-year rate of change in consumer prices was projected to be 0.0 percent or a slight increase toward the end of the year. This was mainly because the effects of the decline in rice prices and the reduction in electricity and telephone charges were expected to ease in a situation where supply and demand conditions continued improving gradually.
2. Financial environment
The environment for corporate finance was becoming more accommodative on the whole. The lending attitude of private banks was becoming more accommodative, and that of financial institutions as perceived by firms had also been improving. Under these circumstances, lending by private banks increased slightly on a year-on-year basis.
With regard to financing through capital markets, the issuing environment for CP and corporate bonds continued to be favorable, and the amount outstanding of CP and corporate bonds issued had been above the previous year's level.
The year-on-year growth rate of the monetary base increased and was in the range of 2.5-3.0 percent in October. That of the money stock (M2+CDs) increased to around 2.0 percent in September.
II. Summary of Discussions by the Policy Board on Economic and Financial Developments
A. Economic Developments
On the current state of Japan's economy, members agreed that it continued to recover led mainly by steady domestic private demand, and that these developments were in line with the Bank's assessment to date.
Members agreed that overseas economies, particularly those of the United States and East Asia, continued to expand.
On the U.S. economy, some members said that although the effects of the hurricanes had given cause for concern, it was now certain that the economy was continuing to expand led mainly by domestic private demand, as seen in the growth rate of real GDP for the July-September quarter. Some members referred to the continuing high crude oil prices and the increase in consumer prices, and pointed out that there remained strong market concerns about inflation and a possible economic slowdown against the background of high crude oil prices. A few members commented that real estate prices, which had been rising, were recently increasing at a slower pace, and therefore future developments in them and their effects on the economy required close monitoring.
With regard to the Chinese economy, a few members said that it continued to grow strongly, with the growth rate of real GDP in the July-September quarter exceeding 9 percent. One member added that in the current situation the Chinese economy should be watched carefully for a possible reacceleration of economic growth and a heightening of inflationary pressure.
Against this background in overseas economies, some members said that the improving trend of Japan's exports was becoming clearer on the whole, as evidenced by a pickup in exports to China, which had been lacking in momentum, and in exports of IT-related goods.
With regard to domestic demand, a few members commented that strong corporate profits continued to promote the expansion of business fixed investment. Some members expressed the view that private consumption continued to be steady against the background of improvements in the employment and income situation. Some indicators related to private consumption were showing improvement, such as indicators for services consumption and sales at department stores, although there had been somewhat weak indicators during the summer.
Some members said that production was judged to have been generally unchanged or basically continuing its moderate increasing trend, although it decreased by 0.3 percent in the July-September quarter on a quarter-on-quarter basis. This was mainly because the decline was due in part to statistical fluctuations, and also because, judging from a substantial increase in the production forecast index for October and November, production was likely to continue increasing even if it turned out to be somewhat weaker than forecasted. Some members pointed out that production in IT-related sectors had started to increase against the background of completion of inventory adjustments. A few members, however, commented that future developments in production in IT-related sectors required close monitoring, pointing out factors such as that the pace of recovery of production in IT-related sectors was moderate compared to past recoveries in production, prices of some products were slightly weak, and the inventory cycle of IT-related sectors might be becoming shorter than that of non-IT-related sectors.
Some members said that domestic corporate goods prices had continued to increase due mainly to the effects of the rise in prices of commodities, in particular crude oil, at home and abroad. Many members said that although consumer prices (excluding fresh food, on a nationwide basis) declined slightly by 0.1 percent on a year-on-year basis in September, there was no change to their projection that the year-on-year rate of change in consumer prices would likely turn to zero percent or a slight increase toward the end of 2005 as the effects of the decline in rice prices and the reduction in electricity and telephone charges dissipated. One member added that it should be noted that the pace of decline in unit labor costs was slowing due to the rise in labor costs and this in turn was reducing downward pressure on prices.
A few members said that it was confirmed at the meeting of general managers of the Bank's branches and in the
Regional Economic Report
, which was released on October 20, 2005, that the economy was on a recovery trend in most regions, although there were differences in the degree of improvement.
One member commented that real estate prices in Japan were at a turning point from a decline to an increase in contrast to those overseas, and therefore future developments required careful monitoring.
B. Financial Developments
On the financial front, members concurred that the financial environment remained extremely accommodative.
Some members said that in financial markets long-term interest rates had risen somewhat reflecting the slight strengthening of the outlook for economic activity and prices in Japan, while stock prices had been steady. Some members noted that the yen was depreciating against the U.S. dollar reflecting a wider interest rate differential between Japan and the United States.
C. Outlook for Economic Activity and Prices
With regard to the outlook for economic activity and prices, members agreed on the following assessment: Japan's economy was likely to experience a sustained period of expansion at a pace slightly above its potential over the course of fiscal 2006.
Members said that the underlying assumptions and mechanisms behind this economic outlook were as follows.
First, exports were likely to remain on an increase as overseas economies were likely to continue expanding at a pace around their potential growth rates. Second, corporate profits were likely to remain at high levels even with the effects of high crude oil prices factored in. Business fixed investment was also likely to continue increasing as firms had mostly completed adjustments in excess production capacity and debt. Third, strong corporate performance was expected to positively influence the household sector via increases in employment and wages, as well as increases in dividends and stock prices. Finally, the extremely accommodative financial conditions were likely to support private demand.
Members commented on the background to the outlook for Japan's economy that it was expected to experience a sustained period of recovery, albeit at a moderate pace. They agreed that, in a situation where corporate behavior would generally remain cautious, economic recovery was likely to remain moderate but at the same time excessive build-up of stocks was likely to be avoided.
On prices, members agreed that domestic corporate goods prices were likely to record a relatively large increase in fiscal 2005 and would probably continue increasing in fiscal 2006, albeit at a slower pace, with a caveat that the actual outcome would depend heavily on developments in crude oil and other commodity markets.
Many members said that the year-on-year rate of change in the consumer price index (CPI) was likely to be around zero percent in fiscal 2005 and a positive figure in fiscal 2006, in view of the gradually narrowing output gap and the weakening downward pressures from unit labor costs as an increasing number of firms perceived themselves as short of labor. One member referred to the revision of the base year for the CPI in summer 2006, and expressed the view that although the extent of the impact was not clear yet, it was likely to be smaller than that of the previous revision when the base year was changed from 1995 to 2000 and new items such as personal computers were covered.
Many members raised the following upside and downside risks to the above outlook: the path of crude oil prices; the path of the global economy, particularly that of the U.S. economy; and the path of domestic private demand. They also said that the Bank should point out both upside and downside risks to the outlook for price developments and raised the following risks unique to prices: the uncertainty over developments in the prices of crude oil and other commodities; an increase in inflationary expectations against the background of a sustained narrowing of the output gap; and the intensification of competition among firms reflecting, for example, further deregulation.
With regard to the path of crude oil prices, one member expressed the view that high crude oil prices would be compatible with the expansion of the global economy, because the primary factor behind this surge was increased global demand. A few members pointed out that, as the possibility could not be ruled out that supply-side constraints might tighten, careful attention should be paid to the risk that this could cause economic stagnation with rising prices. Some members said that, if crude oil prices remained high, the global economy might be adversely affected by an increase in consumer prices for a broad range of items or a rise in concerns over increasing inflationary pressures with a concomitant rise in interest rates.
Some members commented on the U.S. economy that attention should be paid to the risk of a downturn in the buoyant household spending as a result, for example, of downward pressure on real disposable income due to high crude oil prices and a consequent deterioration in consumer confidence, or of a change from the uptrend in housing prices. Some members noted the rise in potential inflationary risks due to the surge in crude oil prices and the increase in unit labor costs, and said that its impact on U.S. financial markets and the international flow of funds should be watched closely. One member referred to the Chinese economy and said that it would require close monitoring for possible effects of supply constraints in, for example, energy and of avian flu.
Based on the above outlook for economic activity and prices, members concurred that the Bank should clearly explain its basic thinking on the future conduct of monetary policy in the
Outlook for Economic Activity and Prices
(hereafter the Outlook Report).
Members raised the following points. First, the effects of the quantitative easing policy were increasingly coinciding with the effects of short-term interest rates being at practically zero percent. Thus, a change of the policy framework itself would not imply an abrupt change in terms of effects of policy. Second, the possibility of a departure from the present monetary policy framework was likely to increase over the course of fiscal 2006. Third, in relation to changing the policy framework, the Bank would need to monitor financial market conditions carefully when reducing the outstanding balance of current accounts. And fourth, regarding the course of monetary policy after the change of the framework which would be conceptually outlined in the Outlook Report, it was likely that the Bank would have latitude in conducting monetary policy through the entire process during and after the change of the framework. On the fourth point, one member added that appropriately changing the policy framework with the right timing would give the Bank latitude in conducting monetary policy after the change of the framework.
Many members said that in order to ensure smooth formation of interest rates in financial markets, reflecting the conditions underlying economic activity and prices, it was essential that the Bank clearly explain its assessment of economic activity and prices as well as the thinking behind the conduct of monetary policy and endeavor to stabilize market expectations. One of these members said that since interest rates fluctuated reflecting market participants' outlook for economic activity and prices as well as their expectations about the Bank's conduct of monetary policy, to ensure smooth formation of interest rates it was extremely important that the Bank did not misjudge the appropriate timing in conducting monetary policy. Some members said that it was not possible for the Bank to completely stabilize market expectations through its communication with the public and therefore the Bank should make this point clear to avoid misunderstanding. One member expressed the view that the Bank could consider some way of providing an anchor for price stability.
III. Summary of Discussions on Monetary Policy for the Immediate Future
On the monetary policy stance for the immediate future, members agreed that, in a situation where the CPI had been declining slightly on a year-on-year basis, it was appropriate to maintain the current framework of the quantitative easing policy in accordance with the conditions in the Bank's commitment.
A few members expressed the view that it would be appropriate to lower the target range for the outstanding balance of current accounts at the Bank at this point mainly for the following reasons. First, financial institutions' demand for liquidity required for funds management was on a declining trend. And second, the Bank should encourage formation of interest rates based on the market mechanism as much as possible to ensure smooth termination of the quantitative easing policy in the future.
Against this view, the majority of members said that it was appropriate to maintain the current guideline for money market operations, including the proviso. One member expressed the view that maintaining the outstanding balance of current accounts within the target range without impairing the functioning of the market was feasible, as responses of financial institutions to the Bank's funds-supplying operations continued to be favorable.
One member expressed the following view in relation to how to judge whether the conditions in the Bank's commitment had been fulfilled. In October 2003, the Bank clarified its commitment in order to provide a clearer explanation of the commitment to continue the quantitative easing policy until the year-on-year rate of change in the CPI registered zero percent or higher on a sustainable basis. The first and second conditions in the commitment were closely linked and it was meaningless to discuss them separately, and thus they should be considered together when judging whether they had been fulfilled. After making that judgment, the Bank should examine whether there was still a rationale for continuing the quantitative easing policy. It was important for the Bank to confirm through this process that the year-on-year rate of change in the CPI was registering zero percent or higher on a sustainable basis. A different member said that how the upward bias of the CPI should be taken into account was also an issue to be discussed.
IV. Remarks by Government Representatives
The representative from the Ministry of Finance made the following remarks.
(1) The Bank would present its outlook for economic activity and prices for fiscal 2006 in the October Outlook Report to be released after the meeting. The outlook for consumer prices and the conduct of monetary policy described in the Outlook Report were a particular focus of market participants' attention in relation to the Bank's commitment to continuing the quantitative easing policy.
(2) In this regard, first, even if Policy Board members' forecasts of the real GDP growth rate and the rate of change in the CPI for fiscal 2005 and 2006 were revised upward in the October Outlook Report from those in the April Outlook Report, Japan's economy, in terms of price developments, continued to be in deflation and risk factors such as crude oil prices and the global economy continued to require close attention as mentioned in the October Outlook Report.
(3) Second, with regard to the future conduct of monetary policy, the government would like the Bank to closely monitor developments in financial markets and overall interest rates to ensure that deflation was overcome. Since there was a risk that the release of the October Outlook Report might create a situation where various speculations about the Bank's future conduct of monetary policy could easily arise, the government would like the Bank to carefully explain to market participants and the public that it would firmly continue with the current quantitative easing policy in overcoming deflation.
The representative from the Cabinet Office made the following remarks.
(1) Japan's economy was recovering at a moderate pace. However, deflation persisted and overcoming it continued to be an important policy task the government should tackle.
(2) Although it was expected that Japan's economy would experience a sustained period of expansion, due consideration should be given to the fact that the risk that developments in crude oil prices could affect corporate profits, prices, and the household sector was not negligible. In assessing the state of deflation, a comprehensive analysis of price developments based not only on consumer prices but also on the GDP deflator would be necessary. The GDP deflator was still declining on a year-on-year basis. The government would like the Bank to carefully assess the consumer price situation, giving due consideration mainly to the effects of the rise in crude oil prices, special factors, and statistical bias. The growth rate of the money stock was still low despite the economic recovery. However, a recovery of the credit creating function could be expected, mainly because concern about financial system stability had disappeared and the year-on-year change in lending by private banks (after adjustment for special items) had finally turned positive. It was essential that the money stock increase in overcoming deflation. The government therefore hoped that the Bank would implement effective monetary policy that would be consistent with the government's policy efforts to overcome deflation and with its outlook for the economy and that would eventually lead to an increase in the money stock.
(3) The government would like the Bank to consider presenting a desirable price level and the future path, including the Bank's thinking about the course in reaching that level, in order to promote proper formation of expectations in financial markets, and thereby contribute to sustainable economic growth with price stability and the overcoming of deflation.
Based on the above discussions, the majority of members agreed that it was appropriate to maintain the current guideline, including the proviso, for money market operations with the target for the outstanding balance of current accounts at the Bank at around 30 to 35 trillion yen.
One member, however, said that the member would like to propose that the Bank should lower the target for the outstanding balance of current accounts at the Bank from "around 30 to 35 trillion yen" to "around 27 to 32 trillion yen." A different member said that the member would like to propose that the Bank should lower the target for the outstanding balance of current accounts at the Bank from "around 30 to 35 trillion yen" to "around 25 to 30 trillion yen."
As a result, the following proposals were submitted and put to the vote.
Mr. T. Fukuma proposed the following guideline for money market operations for the intermeeting period ahead:
The Bank of Japan will conduct money market operations, aiming at the outstanding balance of current accounts held at the Bank at around 27 to 32 trillion yen.
Should there be a risk of financial market instability, such as a surge in liquidity demand, the Bank will provide more liquidity irrespective of the above target.
The proposal was defeated by majority vote.
Votes for the proposal: Mr. T. Fukuma.
Votes against the proposal: Mr. T. Fukui, Mr. T. Muto, Mr. K. Iwata, Ms. M. Suda, Mr. S. Nakahara, Mr. H. Haru, Mr. A. Mizuno, and Mr. K. G. Nishimura.
Mr. A. Mizuno proposed the following guideline for money market operations for the intermeeting period ahead:
The Bank of Japan will conduct money market operations, aiming at the outstanding balance of current accounts held at the Bank at around 25 to 30 trillion yen.
The proposal was defeated by majority vote.
Votes for the proposal: Mr. A. Mizuno.
Votes against the proposal: Mr. T. Fukui, Mr. T. Muto, Mr. K. Iwata, Ms. M. Suda, Mr. S. Nakahara, Mr. H. Haru, Mr. T. Fukuma, and Mr. K. G. Nishimura.
To reflect the majority view, the chairman formulated the following proposal.
The Chairman's Policy Proposal on the Guideline for Market Operations:
The guideline for money market operations for the intermeeting period ahead will be as follows, and will be made public by the attached statement (see
Attachment
The Bank of Japan will conduct money market operations, aiming at the outstanding balance of current accounts held at the Bank at around 30 to 35 trillion yen.
Should there be a risk of financial market instability, such as a surge in liquidity demand, the Bank will provide more liquidity irrespective of the above target. When it is judged that liquidity demand is exceptionally weak considering such factors as responses of financial institutions to the Bank's funds-supplying operations, there may be cases where the balance of current accounts falls short of the target.
Votes for the proposal: Mr. T. Fukui, Mr. T. Muto, Mr. K. Iwata, Ms. M. Suda, Mr. S. Nakahara, Mr. H. Haru, and Mr. K. G. Nishimura.
Votes against the proposal: Mr. T. Fukuma and Mr. A. Mizuno.
Mr. T. Fukuma dissented from the above proposal, arguing that the Bank should lower the target range for the outstanding balance of current accounts at the Bank gradually in a step-by-step manner, while carefully examining economic and financial developments, as long as the maintenance of the current framework of the quantitative easing policy would not be hindered. Noting the current situation where market participants had gradually factored in a scenario where the Bank would terminate the quantitative easing policy, he gave the following three reasons. First, the Bank should encourage formation of interest rates based on the market mechanism as much as possible to restore the proper functioning of the market. Second, the Bank should shorten maturities of funds-supplying operations to enhance the timeliness and flexibility of its conduct of monetary policy. And third, it was possible to support the ongoing economic recovery and thereby emergence from the situation of slight price declines by maintaining the zero interest rate environment based on the Bank's commitment in terms of policy duration.
Mr. A. Mizuno dissented from the proposal for the following reasons. First, there had been no change from the downtrend in financial institutions' precautionary demand for liquidity, and thus lowering the outstanding balance of current accounts at the Bank as a response to this was reasonable policy conduct. Second, the quantitative easing policy should be terminated with appropriate timing, but to ensure financial market stability in the period around the termination of the quantitative easing policy it would be appropriate to start lowering the outstanding balance in line with developments in the market, rather than lowering it over a short period of time after achieving the conditions in the Bank's commitment to continue the policy. And third, delaying the lowering of the target range involved economic cost, for example, continuation of an abnormal situation where the massive outstanding balance of current accounts at the Bank had been restraining a rise in interest rates on term instruments and hindering interest rates from performing their function.
VI. Discussion on the
Outlook for Economic Activity and Prices
Members discussed the draft of the
Outlook for Economic Activity and Prices
(consisting of "The Bank's View" and "The Background"), and put "The Bank's View" to the vote. The Policy Board decided, by unanimous vote, the text of "The Bank's View." It was confirmed that "The Bank's View" would be published immediately after the meeting and the whole report on November 1, 2005.
Votes for the proposal: Mr. T. Fukui, Mr. T. Muto, Mr. K. Iwata, Ms. M. Suda, Mr. S. Nakahara, Mr. H. Haru, Mr. T. Fukuma, Mr. A. Mizuno, and Mr. K. G. Nishimura.
Votes against the proposal: None.
Attachment
October 31, 2005
Bank of Japan
At the Monetary Policy Meeting held today, the Bank of Japan decided, by 7-2 majority vote, to set the following guideline for money market operations for the intermeeting period:
The Bank of Japan will conduct money market operations, aiming at the outstanding balance of current accounts held at the Bank at around 30 to 35 trillion yen.
Should there be a risk of financial market instability, such as a surge in liquidity demand, the Bank will provide more liquidity irrespective of the above target. When it is judged that liquidity demand is exceptionally weak considering such factors as responses of financial institutions to the Bank's funds-supplying operations, there may be cases where the balance of current accounts falls short of the target.