In the minutes of July policy meeting, BoJ maintained that “economy was likely to continue on an “expanding trend” throughout the projection period through fiscal 2021, despite being affected by the slowdown in overseas economies. Exports were projected to “show some weakness” but would stay on a “moderate increasing trend”. The “continued relatively weak developments in prices” was largely affected by “deeply entrenched mindset and behavior based on the assumption that wages and prices would not increase easily”. Members still believed that CPI was “likely to increase gradually toward 2 percent”.
Four risks were outlined on economic outlook: (1) developments in overseas economies; (2) the effects of the scheduled consumption tax hike; (3) firms’ and households’ medium- to long-term growth expectations; and (4) fiscal sustainability in the medium to long term. Also downside risks from overseas were “significant”: (1) the consequences of protectionist moves — including the U.S.-China trade friction — and their effects, as well as (2) developments in the Chinese economy, including the effects of the aforementioned factor and (3) the possibility that the progress in adjustments in the global cycle for IT-related goods might take longer than expected.
On monetary policy, most members recognized that downside risks warranted attention. And, “it was appropriate to persistently continue with the current powerful monetary easing as the momentum toward achieving 2 percent inflation was being maintained with the output gap remaining positive”.
