Minutes of the Monetary Policy Meeting

on July 14 and 15, 2003
(English translation prepared by the Bank's staff based on the Japanese original)

August 13, 2003
Bank of Japan

A Monetary Policy Meeting of the Bank of Japan Policy Board was held in the Head Office of the Bank of Japan in Tokyo on Monday, July 14, 2003, from 2:04 p.m. to 3:32 p.m., and on Tuesday, July 15, from 9:00 a.m. to 11:16 a.m.¹

Policy Board Members Present
Mr. T. Fukui, Chairman, Governor of the Bank of Japan
Mr. T. Muto, Deputy Governor of the Bank of Japan
Mr. K. Iwata, Deputy Governor of the Bank of Japan
Mr. K. Ueda
Mr. T. Taya
Ms. M. Suda
Mr. S. Nakahara
Mr. H. Haru
Mr. T. Fukuma

Government Representatives Present
Mr. T. Taniguchi, Senior Vice Minister of Finance, Ministry of Finance²
Mr. H. Tsuda, Deputy Vice Minister for Policy Planning and Coordination, Ministry of Finance³
Mr. J. Hamano, Deputy Director General, Cabinet Office

Reporting Staff
Mr. E. Hirano, Executive Director (Assistant Governor)
Mr. M. Shirakawa, Executive Director
Mr. A. Yamamoto, Executive Director
Mr. H. Yamaguchi, Adviser to the Governor, Policy Planning Office
Mr. S. Kushida, Deputy Director-General, Policy Planning Office
Mr. H. Nakaso, Director-General, Financial Markets Department
Mr. H. Hayakawa, Director-General, Research and Statistics Department
Mr. K. Momma, Deputy Director-General, Research and Statistics Department
Mr. A. Horii, Director-General, International Department

Secretariat of the Monetary Policy Meeting
Mr. K. Akiyama, Director-General, Secretariat of the Policy Board
Mr. Y. Nakayama, Adviser to the Governor, Secretariat of the Policy Board
Mr. H. Onobuchi, Deputy Director, Secretariat of the Policy Board
Mr. H. Yamaoka, Senior Economist, Policy Planning Office
Mr. T. Kato, Senior Economist, Policy Planning Office

The minutes of this meeting were approved by the Policy Board at the Monetary Policy Meeting held on August 7 and 8, 2003 as "a document which contains an outline of the discussion at the meeting" stipulated in Article 20, Paragraph 1 of the Bank of Japan Law of 1997. Those present are referred to by their titles at the time of the meeting.
Mr. Taniguchi was present on July 15.
Mr. Tsuda was present on July 14.

I. Summary of Staff Reports on Economic and Financial Developments⁴

A. Money Market Operations in the Intermeeting Period

The Bank conducted market operations in accordance with the guideline decided at the previous meeting on June 25, 2003.⁵ As a result, the outstanding balance of current accounts at the Bank was at the 28-30 trillion yen level.

The weighted average of the uncollateralized overnight call rate was in the -0.004-0.000 percent range from June 25 to 27, as some foreign banks released funds at negative interest rates in response to the temporary expansion in the negative cost of funding yen in exchange for the U.S. dollar. The rate was in the 0.001-0.002 percent range thereafter.

B. Recent Developments in Financial Markets

Money market rates continued to be stable due to the Bank's provision of ample liquidity. Interest rates on term instruments, such as Euroyen rates, remained generally steady at low levels. Interest rates on Euroyen futures and yields on treasury bills with relatively long maturity rose very marginally, reflecting the increase in long-term interest rates.

Long-term interest rates had risen, reflecting the recovery in Japanese stock prices and the rise in long-term interest rates in the United States and Europe, and were recently at around 1 percent. The yield differentials between Japanese government bonds (JGBs) and corporate bonds in the secondary market had expanded slightly.

The Nikkei 225 Stock Average recovered to the 9,500-10,000 yen level. This was mainly due to the following factors: stock prices overseas were rising; some market participants' view of the outlook for Japan's economy was improving; and in this situation foreign investors continued to take an active stance toward investing in Japanese stocks.

The yen was recently moving at the 117-119 yen level against the U.S. dollar, almost the same level as at the time of the previous Monetary Policy Meeting on June 25, 2003.

C. Overseas Economic and Financial Developments

The U.S. economy had stayed on a modest recovery trend supported by the firmness in household spending. However, positive developments in business activity, for example, business fixed investment, had not yet been observed.

Regarding developments in household spending, real private consumption remained on a moderate upward trend in May, increasing by 0.3 percent from the previous month. Automobile sales for June were firm. Housing investment continued to be at high levels.

In the corporate sector, on the other hand, the recovery in production continued to be weak. Business fixed investment also continued to lack momentum.

The employment situation deteriorated overall. Private nonfarm payroll employment for June decreased for the fifth consecutive month and the unemployment rate for June increased to 6.4 percent, as firms continued to reduce labor costs.

In this situation, the Federal Open Market Committee (FOMC) lowered its target for the federal funds rate by 25 basis points on June 25, 2003. With regard to future risks, the FOMC expressed the view that "the upside and downside risks to the attainment of sustainable growth for the next few quarters are roughly equal." As for prices, it expressed the view that "the probability, though minor, of an unwelcome substantial fall in inflation exceeds that of a pickup in inflation from its already low level." The FOMC judged that on balance "the latter concern is likely to predominate for the foreseeable future." Judging from developments in U.S. federal funds rate futures, expectations that the FOMC would further reduce its target for the federal funds rate were subsiding and the majority of market participants considered that the target rate would remain unchanged for the remainder of 2003.

In U.S. financial markets, long-term interest rates had risen mainly due to slight improvements in the economic outlook and a decrease in market participants' expectations for further monetary easing. Stock prices had recently started rising again.

In the euro area, the economy was decelerating since domestic demand components, such as private consumption and business fixed investment, remained sluggish and exports were slowing.

Exports from the euro area were weak mainly due to the appreciation of the euro. The Purchasing Managers' Index (PMI), which reflected the state of production, was sluggish. The employment situation continued to deteriorate gradually. In this situation, consumer confidence continued to be weak.

In European financial markets, long-term interest rates had increased since mid-June in line with the rise in U.S. long-term interest rates. Stock prices had been rising slightly since the beginning of July. Developments in EURIBOR futures continued to indicate that the market expected a reduction in the key interest rates of the European Central Bank (ECB) by early 2004. Such expectations, however, had subsided somewhat recently.

In East Asian economies, the pace of economic recovery was decreasing slightly. In economies such as China, Hong Kong, Taiwan, and Singapore, private consumption had decreased during the severe acute respiratory syndrome (SARS) epidemic. In South Korea, private consumption was decelerating and the pace of increase in business fixed investment was slowing.

D. Economic and Financial Developments in Japan

1. Economic developments

Public investment was declining, and it was projected to continue declining for the time being.

Real exports had been more or less flat on balance. They increased by 3.4 percent in May from the previous month despite concerns about the effects of SARS, and the monthly average of the April-May period was slightly higher than that of the January-March quarter of 2003.

Business fixed investment was on a gradual recovery trend, albeit showing some fluctuations, reflecting the continuing improvement in corporate profits. As for the outlook for business fixed investment, given that corporate profits were recovering, the uptrend was expected to become established in the period ahead once exports and production resumed an upward trend. However, given various structural factors, the recovery in business fixed investment was likely to remain modest.

As for the household sector, the employment and income situation remained severe. The number of employees in the Labour Force Survey, including non-regular employees such as temporary workers, had almost stopped declining, but the number of regular employees in the Monthly Labour Survey, in which regular employees had more share compared to the Labour Force Survey, was still decreasing. Household income continued to decline, albeit gradually.

Given this situation, private consumption continued to be weak. Various sales statistics declined in April, and although they recovered in May to some extent, the monthly average of the April-May period for most of these statistics was slightly below that of the January-March quarter. Private consumption overall was likely to remain weak, as the employment and income situation was expected to remain severe for the time being.

Production seemed to have remained basically level in the April-June quarter after a quarter-on-quarter increase of 0.3 percent in the January-March quarter.

On the price front, import prices turned down in May from the levels of three months earlier, partly reflecting the sharp fall in crude oil prices in early spring. However, they were likely to stop declining shortly, since crude oil prices had been firm thereafter.

Domestic corporate goods prices also turned down in May from the levels of three months earlier due to the materialization of the effects of the sharp fall in crude oil prices. As for the outlook, domestic corporate goods prices overall were projected to continue declining moderately given that upward pressure on prices of materials was weakening and machinery prices remained on a downward trend.

The year-on-year decline in consumer prices in May was about the same as in April, when the rate of decline had narrowed marginally due to the fact that the cost of medical treatment rose and the effects of the reduction in electricity charges in the same month of 2002 had ceased. As for the outlook for consumer prices, they were likely to remain under downward pressure because private consumption remained weak and wages continued to follow a moderate downward trend. However, there was also upward pressure on consumer prices, since firms were no longer adopting a low-price strategy as in around 2000 and the effects of the increase in the tax on cigarettes and of the rise in electricity charges were expected to materialize in July. Given these downward and upward pressures, consumer prices were projected to decline at the current pace on a year-on-year basis for the time being.

2. Financial environment

With regard to credit aggregates, private banks' lending continued to decline by about 2.0-2.5 percent on a year-on-year basis. The amount outstanding of corporate bonds and CP issued had been above the previous year's level until June, but from early July, firms seemed to be taking a wait-and-see stance in the corporate bond issuance market in view of the rise in long-term interest rates. The issuing environment of corporate bonds and CP continued to be favorable on the whole, especially for firms with low credit risk.

The total amount of funds raised by the private sector, including private banks' lending and funds raised through financial markets, continued to decline.

As for monetary aggregates, the monetary base increased further in June, mainly because the growth rate of the outstanding balance of current accounts held at the Bank increased. The year-on-year growth rate of the monetary base for June was around 20 percent. The year-on-year growth rate of the money stock for June was somewhat less than 2 percent.

In corporate finance, credit demand in the private sector continued to follow a downtrend mainly because business fixed investment was still at low levels and firms were continuously reducing their debts.

Private banks remained cautious in extending loans to firms with high credit risk, while on the other hand they continued to be more active in extending loans to blue-chip firms. Recently, however, their lending attitude seemed to be becoming slightly more accommodative in areas such as setting of interest margins. Reflecting these developments, the lending attitude of financial institutions as perceived by firms was improving somewhat, although small firms continued to perceive it as severe.

The financial position of firms was improving slightly on the whole, although that of small firms in particular remained severe.

In sum, money market conditions continued to be extremely easy. The fund-raising environment in corporate finance had not changed significantly: the environment for firms, particularly those with high credit risk, remained generally severe. The issuing environment of corporate bonds and CP continued to be favorable mainly for firms with low credit risk. Therefore, developments in the financial and capital markets, the behavior of financial institutions, and the situation of corporate finance continued to require close monitoring.

4Reports were made based on information available at the time of the meeting.
5The guideline was as follows:
The Bank of Japan will conduct money market operations, aiming at the outstanding balance of current accounts held at the Bank at around 27 to 30 trillion yen.
Should there be a risk of financial market instability, such as a surge in liquidity demand, the Bank will provide more liquidity irrespective of the above target.

II. Summary of Discussions by the Policy Board on Economic and Financial Developments

A. Economic Developments

Members agreed on the state of Japan's economy as follows. First, economic activity remained virtually flat. And second, the risk of negative effects of SARS on Japanese exports was lower than the previous month.

As for exports, many members expressed the view that, judging from the recovery in real exports in May after the temporary decline in April, the negative effects of SARS on Japanese exports to other Asian countries, which had caused concern previously, seemed to have been limited. Some members also said that downside risks to exports mentioned in previous months' "The Bank's View" of recent economic and financial developments seemed to have decreased.

Members then discussed developments in overseas economies that could affect Japanese exports.

Some members said that the U.S. economy had stayed on a modest recovery trend supported by the firmness in private consumption. However, despite policy measures such as tax cuts and the interest rate reduction, there were no clear signs of recovery in employment, production, and business fixed investment, and the momentum for an increase in production and income was not growing.

A few of these members said that a closer examination of developments in U.S. financial markets revealed that market expectations of future growth in the IT sector and IT-related investment were increasing. These members also pointed out that U.S. stock prices were rising led by high-tech stocks and there were signs that the decline in IT-related investment was coming to a halt. On this basis, they said that developments in IT-related demand would be a key factor that would require monitoring in order to predict future developments in the U.S. economy.

With regard to European economies, a few members pointed out that there was a risk that the appreciation of the euro and restrictions on the government deficit imposed on euro area countries would exert downward pressure.

As for East Asian economies, many members expressed the view that their economic growth for the April-June quarter seemed to have decelerated, mainly due to the negative effects of SARS on private consumption. A few of these members also said that self-sustained economic growth was likely to resume in the near future reflecting the following factors. First, the momentum for economic growth seemed potentially firm. And second, there were some signs of pent-up demand in the region after the containment of SARS.

With regard to the Japanese corporate sector, many members pointed out that the June Tankan (Short-Term Economic Survey of Enterprises in Japan) suggested that corporate profits continued to improve, and business sentiment was improving slightly against the background of a decrease in uncertainties, such as geopolitical risks and SARS, and the rise in stock prices at home and abroad.

As for developments in business fixed investment, some members said that in the June Tankan business fixed investment plans for fiscal 2003, especially those of large manufacturers, were firm for this time of year. One of these members further noted that, although manufacturers' forecasts made in March for machinery orders in the April-June quarter had been somewhat weak, the actual figures released since then were relatively firm.

Regarding the household sector, many members expressed the view that the employment and income situation remained severe, as firms continued to reduce personnel expenses. The view was held by many members that private consumption remained basically weak, as suggested by sales indicators such as sales at department stores and supermarkets as well as the number of new passenger-car registrations.

A few members pointed out the following developments: the fall in the growth rate of labor productivity came to a halt in 2001 and it had been level since then; the number of employees in the Labour Force Survey had stopped declining; and summer bonuses in the survey conducted by the Japan Business Federation (Nippon Keidanren) had increased for the first time in two years. These members then said that future developments in the employment and income situation required monitoring.

As for the outlook for the Japanese economy, a few members said that the standard scenario--exports and production would regain momentum and a virtuous circle would start working on the economy--remained valid. These members, however, said that the level of uncertainty of a recovery in overseas economies, which was the prerequisite for the standard scenario, was still high.

One of these members commented on the outlook for the U.S. economy that judging from indicators related to employment and business fixed investment, the momentum for a recovery in the near future remained highly uncertain, despite the rise in stock prices. Regarding the outlook for East Asian economies, this member said that a point that required monitoring was whether or not their growth rate would increase again after the containment of SARS.

A few members said that in Japan as well as overseas, attention would be focused on whether the rise in financial market expectations, which in many countries commonly preceded an economic recovery, would actually be followed by an improvement in economic indicators.

One of these members pointed out that there were as yet no clear positive movements in recent economic indicators, as private consumption remained weak and exports and production continued to be virtually flat. The member also said that there was a possibility that firms' stance toward investment might be positively affected if the outlook for their business performance improved, as firms had been keeping business fixed investment below the level of their cash flow. Nevertheless, decisions on investment would be strongly affected by business sentiment. The member added that the Japanese economy would for some time remain susceptible to both upside and downside risks stemming particularly from overseas factors.

B. Financial Developments

Members pointed out that the rise in stock prices and long-term interest rates in Japan was parallel with those in overseas financial markets. Many members raised factors behind these developments as follows. First, uncertainty about the global economic outlook had subsided. Second, overly pessimistic views about the outlook for the Japanese economy, which had dominated since the beginning of 2003, were beginning to be revised. A few of these members said that market participants had been risk averse and had shifted their funds to bonds from stocks, but recently movements in the opposite direction were occurring. One of them added that there was also a marked change in the international flow of funds: investors were shifting their funds to assets denominated in U.S. dollars and Asian currencies, including the yen, from high-interest ones denominated in Australian and New Zealand dollars and in euros.

Some members referred to the effects of the rise in long-term interest rates and said that, so far, they had not significantly affected the corporate financing environment, including the cost for firms of raising funds. As for the effects on financial institutions, overall the positive effects on unrealized capital gains/losses on their stockholdings due to the rise in stock prices had outweighed the losses incurred from the decline in the value of their JGB holdings.

One of these members said that the recent correction in the yield curve, which had flattened considerably, could be expected to have the positive effect of contributing to securing banks' profits. A different member pointed out that the recovery in stock prices would have positive effects on the general sentiment and would also contribute to reducing concerns about financial system stability.

Many members thus expressed the view that recent developments in financial markets should basically be taken calmly.

Some members said that the rise in stock prices and long-term interest rates at home and abroad was not based on a clear recovery in economic indicators, and thus stock prices and long-term interest rates would be likely to search for a new equilibrium level, and these movements would be influenced by market participants' expectations and overseas market developments.

One member expressed the view that foreign investors' increased investment in Japanese stocks would place upward pressure on the yen in the present situation where Japan's current account surplus was expanding somewhat. The member continued that if the Japanese currency authority were to intervene in foreign exchange markets with the intention of offsetting such upward pressure on the yen, it should be borne in mind that long-term interest rates in Japan could tend to move more closely in line with a rise in those abroad. A few members including this member said that attention should be paid to the risk of a rise in long-term interest rates accompanying a substantial expansion in the risk premium.

A different member remarked that it was important to monitor developments in long-term interest rates because they were a valuable source of information and had considerable implications for the conduct of monetary policy in the foreseeable future.

On the basis of the above discussions, members agreed that developments in financial markets and their effects continued to require careful monitoring.

III. Summary of Discussions on Monetary Policy for the Immediate Future

On the monetary policy stance for the immediate future, members agreed that it was appropriate to maintain the current target range of "around 27 to 30 trillion yen" for the outstanding balance of current accounts at the Bank, in view of the following factors. First, economic activity remained virtually flat. Second, the risk of SARS affecting Japanese exports seemed to have declined to some extent. And third, there were signs that business sentiment was recovering among some firms.

Some members commented on policy issues in the medium to long term.

One member said that, when in the future there was a clear prospect of a full-fledged economic recovery and of the economy overcoming deflation, attention should be paid to the risk that unstable developments in long-term interest rates--a rise accompanying an expansion of the risk premium--might hinder a sustained recovery of the economy by affecting financial institutions' profits and corporate financing. The member continued that this point should be discussed from a broad perspective of how the economy as a whole could absorb the cost, if, as could happen, there was a rise in interest rates deviating from economic fundamentals during the recovery phase of the economy. Thus, the concept of risk management for the overall economy was important. Another member agreed with this viewpoint.

A different member said that concern about the stability of the financial system was subsiding recently, but there remained issues that needed to be dealt with in overcoming the nonperforming-loan problem, such as injection of public funds into financial institutions for precautionary purposes and the accounting treatment of deferred tax assets.

Another member said that when long-term interest rates were on the rise, calls for the authorities to constrain the rise by intervening to adjust the supply-demand balance of JGBs tended to increase. The member noted however that theoretically, controlling long-term interest rates was not possible without sacrificing other important policy objectives, as in the case of controlling the foreign exchange rate. Furthermore, the member presented the lesson learned from the experience of the United States during the 1940s and 1950s when the Federal Reserve adopted a policy of pegging yields of government securities. First, once the policy was adopted, it became extremely difficult to exit from the policy regime. Second, as a result, price stability was damaged. And third, the market mechanism was impaired because market participants traded in a reactive manner based on the actions of the Federal Reserve.

This member continued that, compared to the 1940s and 1950s, the globalization of the bond market had progressed and the derivatives market had developed, and in this situation, pursuing a policy of controlling long-term interest rates would be much more difficult and problematic. The member added that it would be necessary to discuss possible measures to stabilize inflationary expectations at the stage where the situation of the economy and prices improved and market participants began to expect that the Bank would review the current framework of monetary easing.

One member said that the fiscal authorities should consider the possibility of issuing JGBs with options enabling holders to convert their bonds into inflation-indexed JGBs and floating-rate JGBs to constrain long-term real interest rates within the levels of the potential growth rate of the economy. The member added that it would be appropriate to start deliberating on a numerical target for price stability as soon as possible to anchor the expected inflation rate in the long term.

Some members commented on issues related to the conduct of monetary policy for the time being.

One member said that it was important to consider the conduct of monetary policy separately for the immediate and short term and for the medium to long term. This member continued that it could take more time before prospects for economic recovery and overcoming deflation became clear. This was because the outlook for recovery of overseas economies was still uncertain at present, and against this background, Japanese exports, production, and private consumption continued to be flat, and the inflation rate was negative. In addition, the economy was burdened with various structural problems. Therefore, this member said that for the time being the basic policy of the Bank should be to maintain an easy financial environment under the framework of quantitative easing, and seek measures to strengthen the transmission mechanism of monetary easing.

A different member agreed with this member's view, and said that the Bank should make clear its stance of monetary easing by, for example, setting appropriate maturities for money market operations, and in addition, it should be careful not to make comments that could trigger a surge in the risk premium on JGBs. Some members agreed with this view.

Another member said that, for the time being, it was important for the Bank to consider ways of improving communication with the market, based on close monitoring of developments in medium-term interest rates-where the easing effects of the Bank's commitment in terms of policy duration were considered to be reflected-and reading information regarding how these rates were influenced by the policy.

A different member said that the main feature of the Bank's policy commitment was that the policy duration changed flexibly, and thus the expected duration could vary naturally according to changes in market participants' view of the economic situation. However, in the case where the upward revision of the economic assessment was limited to such an extent that the inflation rate was not expected to start rising, the expected duration would not be significantly influenced. The member therefore expressed the view that it was important that the Bank communicate this point to the market.

IV. Remarks by Government Representatives

The representative from the Ministry of Finance made the following remarks.

(1) The government would continue to steadily promote structural reform based on the "Basic Policies for Economic and Fiscal Policy Management and Structural Reform 2003" (hereafter the Basic Policies 2003), which was approved by the Cabinet on June 27, 2003, as part of the measures to realize sustainable economic growth and overcome deflation.

(2) There had recently been signs that overly pessimistic views about the outlook for the Japanese economy were beginning to be revised, as seen in a rise in stock prices, in addition to an improvement in corporate profits and a recovery in business fixed investment. However, prices continued to fall and the government's judgment was that there was as yet no clear economic recovery as a whole. Therefore, the government considered that the role of the Bank's conduct of monetary policy continued to be vital.

(3) The government would like the Bank to deliberate on and implement effective monetary easing measures to contribute to stimulating the flow of funds in the economy, including measures that would facilitate the smooth financing of small and medium-sized firms.

(4) The summary of discussions by the committee on the internationalization of Japan's financial markets set up by the International Bureau of the Ministry of Finance was released on July 7, 2003. It included a proposal for the establishment and continuous improvement of a market for yen-denominated asset-backed commercial paper (ABCP) whose underlying assets were trade receivables arising from trade between Japanese firms and other Asian firms, with the aim of facilitating smooth trade financing. The government would like the Bank's cooperation in establishing and nurturing this ABCP market.

The representative from the Cabinet Office made the following remarks.

(1) In its Monthly Economic Report released on July 11, 2003, the government kept its assessment of the economy unchanged from the previous month as follows: "While the economy remains roughly flat, weak movements are seen recently in some areas." As for short-term prospects, the economy was expected to move toward recovery if the recovery in the United States and other economies was sustained. However, attention should be paid to the uncertainties surrounding the future of overseas economies and to developments in stock prices and long-term interest rates. The two most important tasks for Japan's economy were to overcome deflation promptly and to achieve a self-sustained economic recovery led by domestic demand. To this end, the government would implement the recently approved Basic Policies 2003, which included policies for overcoming deflation and revitalizing the economy, as soon as possible. The Basic Policies 2003 stated that the government, with the Bank, would take powerful and comprehensive action to overcome deflation. The government considered that through these efforts deflation would be overcome after an intensive adjustment period, as anticipated in the fiscal 2002 version of "Structural Reform and Medium-Term Economic and Fiscal Perspectives."

(2) The Bank had been examining the basic framework for the conduct of monetary policy since March 2003. The government hoped that the Bank would continue to conduct monetary policy that was effective in overcoming deflation. In order to overcome deflation in fiscal 2005, the government would like the Bank first of all to take measures to increase the inflation rate, and also to deliberate on what kind of money market operations would be appropriate to use in line with different stages of future developments in prices and interest rates.

V. Votes

Based on the above discussions, members considered that it was appropriate to maintain the current guideline for money market operations with the target for the outstanding balance of current accounts at the Bank at around 27 to 30 trillion yen.

To reflect this view, the chairman formulated the following proposal and put it to the vote.

The Chairman's Policy Proposal on the Guideline for Market Operations:

The guideline for money market operations in the intermeeting period ahead will be as follows, and will be made public by the attached statement (see Attachment).

The Bank of Japan will conduct money market operations, aiming at the outstanding balance of current accounts held at the Bank at around 27 to 30 trillion yen.

Should there be a risk of financial market instability, such as a surge in liquidity demand, the Bank will provide more liquidity irrespective of the above target.

Votes for the proposal: Mr. T. Fukui, Mr. T. Muto, Mr. K. Iwata, Mr. K. Ueda, Mr. T. Taya, Ms. M. Suda, Mr. S. Nakahara, Mr. H. Haru, and Mr. T. Fukuma.
Votes against the proposal: None.

VI. Discussion on the Bank's View of Recent Economic and Financial Developments

Members discussed "The Bank's View" of recent economic and financial developments, and put it to the vote. By unanimous vote, the Policy Board decided to publish "The Bank's View" on July 16, 2003 in the Monthly Report of Recent Economic and Financial Developments (consisting of "The Bank's View" and "The Background").⁶

6The original full text, in Japanese, of the Monthly Report of Recent Economic and Financial Developments was published on July 16, 2003 together with the English version of "The Bank's View." The English version of "The Background" was published on July 17, 2003.

VII. Approval of the Minutes of the Monetary Policy Meeting

The Policy Board approved unanimously the minutes of the Monetary Policy Meeting of June 10 and 11, 2003 for release on July 18, 2003.

Attachment

For immediate release

July 15, 2003
Bank of Japan

At the Monetary Policy Meeting held today, the Bank of Japan decided, by unanimous vote, to set the following guideline for money market operations for the intermeeting period: