BoJ Monetary Policy Meeting Minutes: Solvency problems for some firms and financial system stability

The Bank of Japan minutes revealed that a few members said prolonged damage to economy from pandemic could lead to solvency problems for some firms, affect financial system stability.

 Members agreed must ease without hesitation if needed, with eye on impact of pandemic on economy.

 One member said must examine whether current policy framework was sufficient, act promptly if action was needed.

 One member said close, appropriate coordination between fiscal, monetary policies crucial.

 Members agreed there was risk financial intermediation could stagnate if financial institutions’ profits remain under prolonged strain.

 Members agreed there was chance financial system vulnerability might heighten.

One member said BoJ must look more deeply into how monetary policy could be shaped in ‘with-corona’ world.

One member said must scrutinise how monetary policy affects business management from medium-term perspective.

 Govt representative said hope boj keeps in close contact with govt in achieving early economic recovery via appropriate monetary policy.

A few members said must retain cautious view on pace of overseas economic recovery.

A few members said must be on alert to risk Japan, other countries, might see a renewed resurgence in coronavirus infections.

One member said a resurgence in infections would delay timing of economic recovery.

One member said impact of pandemic, if prolonged, could lead to job losses, hurt household income and spending.

A few members said prolonged damage to economy from pandemic could lead to solvency problems for some firms, affect financial system stability.

The Bank of Japan publishes a study of economic movements in Japan after the actual meeting.

These meetings are held to review economic developments inside and outside of Japan and indicate a sign of new fiscal policy.

Any changes in this report tend to affect the JPY volatility. Generally speaking, if the BoJ minutes show a hawkish outlook, that is seen as positive (or bullish) for the JPY, while a dovish outlook is seen as negative (or bearish).

Market implications

There is a growing sentiment of insolvency problems in the market.

The bank indexes are bleeding to extraordinarily low levels, such as the KRB.

More here: USD/JPY testing bear’s commitments at a critical resistance