Many members expressed the recognition that, at the January 2019 meeting of general managers of the Bank's branches, most of these managers reported that many firms-- while paying attention to uncertainties over the outlook for the global economy-- maintained their positive fixed investment stance.
Meanwhile, many members expressed the view that, as domestic demand-- such as business fixed investment and private consumption-- had been firm, there was no change in the basic mechanism for economic expansion, in which a virtuous cycle from income to spending operated.
Many members said that business fixed investment continued to increase, as evident from the fact that shipments of capital goods were strong and machinery orders and construction starts, leading indicators of business fixed investment, continued their uptrend.
Many members expressed the view that adjustments in the corporate sector were becoming clearer: given the decline in production, the environment for corporate profits had become more severe and business fixed investment had started to decline.
Votes 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.
Many members said that the Bank was conducting monetary policy in accordance with the commitment based on the CPI, which was clarified in October 2003, and the Bank should always make this clear from the viewpoint of appropriate communication with market participants.
Many members said, however, that if there was currently a problem with the transparency of monetary policy, this was basically because method and measures to achieve the goal were not clear as the transmission mechanism of monetary easing was not functioning fully.
On this basis, many members expressed the recognition that due attention should be paid to protectionist U.S. trade policy and possible reactions to it from other countries, as these could have a significant impact on not only the economies of the countries concerned but also the global economy as a whole.
On the U.S. economy, many members expressed the view that, although there were signs of deceleration, for example in housing sales, it continued to expand steadily, led mainly by household spending and business fixed investment, and was likely to keep expanding at a pace around its potential growth rate.
On the U.S. economy, many members expressed the view that, although negative effects of the hurricanes had started to appear in some indicators as seen in a deterioration in consumer confidence, deceleration in economic activity was likely to be temporary largely because reconstruction-related demand was expected.
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.
Nevertheless, many members expressed the view that the weakness in exports and production had not spread clearly to business fixed investment or private consumption so far, and the basic mechanism for economic expansion, in which a virtuous cycle from income to spending operated, was maintained.
On this basis, many members expressed the view that evaluating the effect of monetary policy and indicating the outlook for overcoming deflation in the Outlook Report would be useful from the viewpoint of enhancing the transparency of monetary policy.
Many members expressed the recognition that the effects of the U.S.-China trade friction and the deceleration in the Chinese economy on Japan's exports remained limited so far, judging from, for example, developments in various indicators and interviews with firms.
Many members said that the pace of growth in the economy was highly likely to recover through the second half of 2019, as the effects of stimulus measures that authorities already had been proceeding with would gradually materialize and a pick-up in IT-related demand was anticipated.
As for the outlook, many members expressed the view that, while firms had been absorbing the effects of the rise in crude oil prices, their interim results suggested that corporate profits remained strong, and therefore momentum in business fixed investment was very likely to be sustainable.
However, many members expressed the recognition that the basic mechanism in which a positive output gap resulted in moderate increases in wages and prices continued to operate, with domestic demand remaining firm and labor shortage continuing.
Following the above discussion, many members expressed the view that recent price developments were not adversely affecting the profits of the distribution sector as a whole, and they were basically compatible with the ongoing economic recovery.
Regarding the outlook, many members expressed the view that, given the developments in leading indicators of business fixed investment, such as machinery orders, there was a possibility that such investment would decelerate somewhat for the time being due to the effects of the slowdown in overseas economies.
On the other hand, many members expressed the view that it was necessary to continue paying attention to the risk that U.S. economic policies and geopolitical events would lead to adjustments in stock prices as well as fluctuations in long-term interest rates.
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