In the minutes of October 30/31 BoJ meeting, there consensus that the global economies continued to grow “firmly on the whole” However, there had been “increasing disparities of growth” among countries and regions. Some members urged to pay attention to slowing pace of improvement in business sentiments, as seen in PMIs in “declining trend”. One member noted due to trade friction and rising US interest rates, overseas economies were “beginning to level off”.
On Japan’s price developments, members believed that the “continued relatively weak developments in prices compared to the economic expansion and the labor market tightening largely had been affected by the deeply entrenched mindset and behavior”. But year-on-year change in CPI was “likely to increase gradually toward 2 percent, mainly on the back of the output gap remaining positive and medium- to long-term inflation expectations rising. ”
On risks to baseline scenario of economic activity and prices, the minutes pointed to four upside and downside risk factor : (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. On specific risks to prices, members pointed to the following three factors: (1) developments in medium- to long-term inflation expectations; (2) the responsiveness of prices to the output gap; and (3) developments in foreign exchange rates and international commodity prices.
