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As noted by Reuters, the Bank of Japan (BoJ) has begun to internally debate potential policy adjustments following the central bank’s October meeting.

Key quotes

“Bank of Japan policymakers last month debated the feasibility of making further tweaks to their ultra-loose monetary framework, with one member arguing that capping bond yields around zero could be counter-productive.

At the October meeting, the BOJ cut its inflation forecasts and maintained its massive stimulus program called yield curve control (YCC).

It also issued a stronger warning over the possibility that prolonged easing could hurt bank profits, and discourage them from boosting lending or take on excessive risk.

While most BOJ policymakers stressed the need to continue the current ultra-easy monetary policy, one of them said keeping bond yields capped around zero could “diminish the positive effects on inflation expectations,” the summary showed.

“It is important to consider in a flexible manner” whether there is room to allow bond yields to move in a wider trading band or changing the target maturity of government bonds, the board member was quoted as saying.

Another board member opposed such a move, saying that further widening the trading band for yields could erode market confidence over the BOJ’s commitment to its 2 percent inflation target.”