Some of these members pointed out that stock prices in Germany and France had fallen by around 30 percent since the start of the year, almost the same as the fall in the Nasdaq composite index, expressing concern about the negative effects on the financial markets and economies of these countries.
Some members said that the upward revision of business fixed investment plans for fiscal 2006 in the June Tankan(Short-Term Economic Survey of Enterprises in Japan) was expected to be small compared to that in fiscal 2005, and attention should be paid to the extent of the actual revision.
On the other hand, some members said that corporate activity lacked strength, as seen in the weak recovery in production and the sluggish business fixed investment in nonresidential structures against the background of the low capacity utilization ratio, and that the employment situation remained severe.
Some members expressed the view that amendment of the proviso would not mean a decrease in the degree of monetary easing; rather, it was a necessary measure to maintain the current policy for a further period while reducing the side effects.
Based on the above discussion, some members said that the Bank should continue to monitor developments in the money market carefully because demand for liquidity remained unstable, although the outstanding balance was finally within the target range of"around 10 to 15 trillion yen.
On this point, some members expressed the view that it was important to examine carefully both economic and price developments because the rise in crude oil prices might affect not only prices but also economic activity.
Based on the above outlook for the corporate sector and its fixed investment, some members expressed the view that the current economic recovery was likely to remain moderate, with the household sector lagging behind the corporate sector.
As for market developments surrounding emerging economies, some members expressed the recognition that capital outflows from emerging economies as a whole had been limited to date, as fundamentals had been firm for many of these economies, mainly in Asia.
Nevertheless, some members, including this member, pointed out that it would be necessary to thoroughly examine the underlying trend in consumption while carefully monitoring the effects of the slowdown in overseas economies on consumer sentiment and of the scheduled tax hike on consumption.
In addition, some members said that developments in negotiations on the United Kingdom's exit from the EU, including the likelihood of the so-called no-deal Brexit, and geopolitical risks in such regions as the Middle East could be raised as risks to developments in overseas economies.
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 expressed the view that an increase in household income was indispensable for a full-fledged recovery of private consumption, and that it was likely to take more time before it could be confirmed that private consumption showed a firm recovery supported by improvement in the employment situation and household income.
On these grounds, some members, including these members, said that the improvement in the corporate sector was becoming clearer with the uptrend in business fixed investment spreading to a wider range of firms, as growth in IT-related investment gradually influenced small IT-related firms.
Some members pointed out that real GDP for the January-March quarter had registered clearly positive growth, but this mainly was due to the decline in imports and the growth in domestic demand, such as in terms of private consumption and business fixed investment, was not as strong as what could be presumed from headline growth.
In relation to this point, some members pointed out that daily and weekly price data also confirmed that price rises-- for example, in food products-- had been spreading recently on the back of rises in labor costs and prices of raw materials. Meanwhile, members shared the recognition that inflation expectations were more or less unchanged.
Some members commented on risk factors for the global economy that crude oil prices had recently started to rise again against the background of concerns over geopolitical risks and tightening of the supply and demand situation. They said that how this affected inflation expectations and economic activity continued to warrant close attention.
With regard to the U.S. economy, some members pointed out that, although the recovery in firms' business performance had been confirmed recently, the pace of economic recovery was not accelerating, as seen in the conspicuous weakness in economic indicators that tended to move in line with economic activity, such as those related to production and employment.
In addition, some members noted that, although the effects of the trade friction on Japan's economy were limited at the moment, attention should be paid not only to the direct impact on Japan's trade activity but also to the possible effects through such indirect channels as the turmoil in global financial markets and the deterioration in business sentiment.
Some member pointed out that(1) corporate profits and business fixed investment remained on an increasing trend and the momentum for recovery led by the corporate sector was being maintained, and(2) the employment and income conditions of households were improving, suggesting that the recovery led by the corporate sector was gradually affecting the household sector.
In relation to this point, some members expressed the recognition that, in order to prevent such misunderstanding, it was necessary for the Bank to make efforts toward stabilizing the yields by purchasing JGBs promptly and appropriately, in case of a rapid increase in the yields that did not reflect developments such as in economic activity and prices.
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