One BOJ board member worried on downward shift in growth: minutes

[December 27, 2013]  By Stanley White

TOKYO (Reuters) — Bank of Japan policymakers broadly agreed the economic recovery will remain on track as an improving job market fuels consumer spending, but some expressed worry about the pace of growth, the minutes of the central bank's November meeting showed.

According to the minutes released on Thursday, two policy board members voiced concern about a large contribution from inventories and a fall in wages in Japan's latest gross domestic product data.

"This may be indicative of a downward shift in growth, instead of merely a temporary slowdown," one member said, referring to the third-quarter GDP data.

Differing views over the pace of growth could make it difficult for the BOJ to present a united front next year, when GDP could dip sharply in the second quarter after a planned increase in the national sales tax.

In the July-September quarter Japan's economy grew 0.3 percent, slower than 0.9 percent growth in the previous quarter as consumer spending and exports weakened.

Many economists say GDP growth has already picked up as exports have improved.

But an increase in the sales tax to 8 percent from 5 percent in April is expected to cause a temporary contraction, which will be a test of whether the BOJ can ride out pressure to ease policy further.

At the Nov. 20-21 meeting, the BOJ board voted unanimously to maintain its pledge of increasing base money, or cash and deposits at the central bank, at an annual pace of 60 trillion to 70 trillion yen ($600 billion to $700 billion).

The BOJ made this pledge in April this year to meet its 2 percent inflation target in two years.

Many members said consumer spending and domestic demand are contributing to broad gains in consumer prices, the minutes showed.

However, one member expressed doubt that the BOJ could meet its price target, because long-term inflation expectations are controlled by economic fundamentals, the minutes showed.

BOJ Governor Haruhiko Kuroda on Wednesday said consumer inflation will exceed 1 percent in the first half of next year and help the central bank achieve its goal of changing the public's perception that deflation will persist.

(Reporting by Stanley White; editing by Edmund Klamann and Chris Gallagher)

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