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Minutes of the Monetary Policy Meeting

on December 15 and 16, 2003
(English translation prepared by the Bank's staff based on the Japanese original)

January 23, 2004
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, December 15, 2003, from 2:00 p.m. to 3:36 p.m., and on Tuesday, December 16, from 9:00 a.m. to 11:19 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. K. Ishii, Senior Vice Minister of Finance, Ministry of Finance2
Mr. H. Tsuda, Deputy Vice Minister for Policy Planning and Coordination, Ministry of Finance3
Mr. Y. Nakajo, Director General for Economic and Fiscal Management, Cabinet Office

Reporting Staff
Mr. E. Hirano, Executive Director (Assistant Governor)
Mr. M. Shirakawa, Executive Director
Mr. A. Yamamoto, Executive Director
Mr. Y. Maehara, Adviser to the Governor, Policy Planning Office
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. T. Takei, Adviser to the Governor, Secretariat of the Policy Board
Mr. H. Onobuchi, Deputy Director, Secretariat of the Policy Board
Mr. K. Murakami, Deputy Director, Secretariat of the Policy Board
Mr. S. Uchida, Senior Economist, Policy Planning Office
Mr. K. Masaki, Senior Economist, Policy Planning Office

  1. The minutes of this meeting were approved by the Policy Board at the Monetary Policy Meeting held on January 19 and 20, 2004 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.
  2. Mr. Ishii was present on December 16.
  3. Mr. Tsuda was present on December 15.

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 November 20 and 21, 20035. The outstanding balance of current accounts at the Bank moved at the 28-32 trillion yen level. As a result of the market operations, the weighted average of the uncollateralized overnight call rate moved in the 0.001-0.002 percent range.

In view of the Prime Minister's decision of November 29, 2003 to temporarily nationalize Ashikaga Bank, the Bank provided an additional 1 trillion yen to the money market on the morning of December 1, the first business day after the decision, by conducting a same-day-start bill purchasing operation, in order to secure the stability of the money market. Following the above operation, the money market was stable on December 1, with the weighted average of the call rate for the day remaining at 0.001 percent.

Market participants continued to feel strongly that there was an abundance of liquidity in the money market, in spite of the approach of the year-end when seasonal demand for liquidity increased.

B. Recent Developments in Financial Markets

Money market rates continued to be stable at low levels due to the Bank's provision of ample liquidity. Yields on treasury bills (TBs) and financing bills (FBs) had risen temporarily, but they were declining recently. Interest rates on Euroyen futures were on a downtrend.

Long-term interest rates had been moving generally within the 1.3-1.6 percent range in the intermeeting period. The yield differentials between Japanese government bonds (JGBs) and corporate bonds in the secondary market had expanded slightly due partly to profit-taking sales by some investors, but they were stable recently.

In the asset-backed securities (ABS) market, the amount outstanding of asset-backed commercial paper (ABCP) was stable at around 6 trillion yen, although new arrangements of ABSs other than ABCP were declining recently due to factors such as an improvement in banks' capital adequacy ratios. The yield differentials between ABCP at issuance and FBs were 5-10 basis points, suggesting that there was strong demand for ABCP for investment. Meanwhile, the total amount of ABSs the Bank had purchased to date was about 250 billion yen, mainly consisting of ABCP.

At a workshop on securitization hosted by the Bank, market participants expressed opinions about the conditions regarding purchase of ABSs by the Bank, calling for revision, for example, of the condition that a certain percentage by value of the underlying assets should be assets related to small and medium-sized firms.

Japanese stock prices rose slightly through early December reflecting a rebound in U.S. stock prices, but declined thereafter due to the appreciation of the yen. Recently, however, they were rising again based on expectations that the situation in Iraq would improve.

The yen was recently being traded around the 107-109 yen range against the U.S. dollar. There were still market expectations that the U.S. dollar would depreciate as concerns about the "twin deficits" in the United States were growing.

C. Overseas Economic and Financial Developments

The U.S. economy was recovering steadily and the momentum for recovery was strengthening. Private consumption had basically been increasing moderately, although it weakened temporarily due partly to the waning of tax-cut effects. Housing investment remained at a high level. Positive developments continued to be observed in orders in the manufacturing sector and business fixed investment, particularly in IT-related goods. Production was increasing, although it lacked momentum. As for the employment situation, where improvement had been delayed, positive developments were being observed, especially in the nonmanufacturing sector.

In U.S. financial markets, stock prices marked their highest levels since the first half of 2002 in early December 2003, after starting to rise in late November following the release of stronger-than-expected economic indicators, such as the preliminary estimate for U.S. real GDP growth in the July-September quarter, which was 8.2 percent on an annualized quarter-on-quarter basis. Long-term interest rates had generally stayed within a certain range with some fluctuations. Judging from developments in federal funds rate futures, market expectations that the Federal Open Market Committee (FOMC) would raise its target for the federal funds rate in early spring of 2004 heightened toward the end of November, but had subsided again very recently.

In the euro area, the overall economy bottomed out. Exports and production had recovered although domestic demand remained sluggish. Real GDP for the July-September quarter increased by 1.5 percent on an annualized quarter-on-quarter basis, after posting negative growth for two consecutive quarters. In the United Kingdom, the economy had been growing more steadily. In European financial markets, stock prices started to rise in late November in line with the developments in U.S. financial markets, and in early December stock prices in both Germany and the United Kingdom marked their highest levels since the summer of 2002.

In East Asian economies, economic recovery continued to gain strength. In China, both domestic and external demand was strong. In many of the NIEs and ASEAN countries, exports and production were increasing, especially in IT-related goods. In South Korea, production was recovering led by external demand, although domestic demand remained sluggish.

Judging from the above developments, the momentum for economic recovery was strengthening, especially in the United States and East Asia, as downside risks to the world economy had further decreased on the whole.

D. Economic and Financial Developments in Japan

1. Economic developments

Real exports rose substantially in October from the monthly average of the July-September quarter, after starting to increase in that quarter reflecting the improvement in the U.S. and East Asian economies. By region, exports to East Asia accelerated, reflecting high growth in China and the recovery in global IT-related demand. Exports to the United States had been somewhat weak until August, but they had recently started to show a clear increase due to the progress in inventory adjustment in automobiles. As for the outlook, exports were expected to continue increasing, since overseas economies were projected to continue growing relatively fast, especially in the United States and East Asia.

Business fixed investment continued a gradual recovery reflecting recovery in corporate profits. As for the outlook, the recovery trend in business fixed investment was expected to become more visible with the ongoing increase in exports and production. However, firms were likely to maintain their cautious investment stance relative to their cash flow, given persisting structural restraints such as balance-sheet adjustment pressures and the weakness in the financial system.

With regard to developments in the household sector, the decline in household income was gradually coming to a halt, since the decline in the number of employees and wages was slowing. As for the outlook, an increase in production and recovery in corporate profits were expected to have gradual positive effects on employment and income. However, household income was unlikely to improve markedly for the time being, since firms were likely to continue restraining labor costs.

Regarding indicators related to private consumption, sales of durable consumer goods, particularly digital appliances, were firm. Sales at department stores and supermarkets were fairly weak in the July-September quarter due to adverse weather conditions, but had picked up thereafter. Indicators for consumer sentiment were generally improving. The outlook, however, for private consumption was that it was likely to remain virtually flat, since household income was unlikely to improve markedly.

Production rose in October after starting to increase in the July-September quarter, and was expected to continue increasing, supported by the recovery in business fixed investment and favorable sales of durable consumer goods in addition to the rise in exports. For the immediate future in particular, it was expected that the pace of increase in production would accelerate in the October-December quarter, since it was likely that exports and business fixed investment would increase at a faster pace in that quarter.

On the price front, import prices continued to decline, with effects from the appreciation of the yen prevailing over those from rising international commodity prices. Domestic corporate goods prices had been firm compared to the levels of three months earlier. The year-on-year change in consumer prices (excluding fresh food) was positive in October for the first time in five and a half years, recording a 0.1 percent increase, due partly to the rise in rice prices as well as factors such as the increase in medical treatment costs, caused by the reform of the medical care insurance system, and the rise in tobacco tax. Regarding the outlook, the year-on-year rate of change in consumer prices was likely to hover around zero percent for the time being due partly to the effects of the rise in rice prices. However, consumer prices were basically projected to continue falling slightly, since the imbalance between supply and demand in the economy remained considerable despite a gradual improvement.

2. Financial environment

With regard to credit aggregates, the pace of year-on-year decline in private banks' lending was slowing slightly. Private banks' lending attitude had been slightly more accommodative on the whole, although they remained cautious in extending loans to firms with high credit risk. Credit demand in the private sector continued to follow a downtrend, since business fixed investment, which was recovering moderately, was still below the level of firms' cash flow. Reflecting these developments, the lending attitude of financial institutions as perceived by firms in general was improving somewhat, although small firms continued to perceive it as severe. The financial position of firms in general was also improving slightly, although that of small firms remained severe.

The issuing environment for CP and corporate bonds was favorable on the whole, especially for firms with high credit ratings. Issuance rates on CP and the yield differentials between CP and TBs or FBs were stable at low levels. Market participants considered that there was hardly any risk premium on funds maturing beyond the year-end. The yield differentials between corporate bonds at issuance and JGBs continued to be at low levels. Under these circumstances, the amount outstanding of CP and corporate bonds issued was above the previous year's level.

The pace of year-on-year decline in funds raised by the private sector had become slightly slower, reflecting the above developments in lending by private banks and in financing through capital markets.

The year-on-year growth rate of the monetary base had slowed somewhat and was around 15 percent. That of the money stock (M2+CDs) had been moving around 1.5 percent. The year-on-year growth rate of broadly-defined liquidity continued to be more or less flat, excluding the effects of temporary factors.

The number of corporate bankruptcies continued on a downtrend.

Developments in financial markets, the behavior of financial institutions, and the situation of corporate finance continued to require close monitoring.

  1. 4Reports were made based on information available at the time of the meeting.
  2. 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 32 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

On the state of Japan's economy, members agreed that it was recovering gradually.

Many members presented a positive assessment that Japan's economy generally had started to recover smoothly, raising as a feature of recent developments in economic indicators the fact that the increase in exports and production was becoming more evident.

Many members said that the momentum for recovery in the U.S. economy was strengthening. The recovery in the corporate sector was becoming conspicuous, mainly in IT-related industries, and positive developments were being observed in the employment situation, where recovery had been delayed.

One member expressed the view that, despite the waning of tax-cut effects, it was becoming increasingly likely that sustainable economic growth would be achieved. This was because the driving force of the U.S. economic recovery, which had mainly been the household sector, was increasingly projected to shift smoothly to the corporate sector.

A different member expressed the view that the pace of narrowing of the output gap might remain moderate due to an increase in supply capacity as the recovery in the U.S. economy had been assisted by the remarkable increase in labor productivity. However, the member said that in the middle of 2004 it would become clear that the decline in the inflation rate was coming to a halt due to the narrowing of the output gap despite the increase in labor productivity, for the following reasons. First, the improvement in the employment situation had started earlier than expected. Second, producer prices were on an uptrend, especially those of materials and intermediate goods. And third, the U.S. dollar was depreciating.

Some members remarked that the Chinese economy continued its high growth with exports and production, particularly of IT-related goods, increasing and domestic demand components such as private consumption continuing to increase. They noted that recently prices, particularly food prices, were on an uptrend, and said that the economy was overheating somewhat. Therefore, the effects on the economy and prices of the central bank's conduct of monetary policy, which had so far been weighted toward tightening, would be a focus of attention.

On the outlook for overseas economies, members agreed that on the whole the risk of a slowdown was subsiding slightly, although there remained various uncertainties such as the "twin deficits" in the United States and geopolitical risks related to the situation in Iraq.

Members agreed that it was clear that Japan's exports were increasing reflecting these developments in overseas economies. One member noted that exports to the United States, which had been somewhat weak until the summer of 2003, were recently definitely recovering as seen in an increase in exports of automobile-related goods against the background of the progress in inventory adjustment there.

With regard to developments in the corporate sector, many members said that a further improvement in business sentiment was confirmed by the December 2003 Tankan (Short-Term Economic Survey of Enterprises in Japan). Some members expressed the view that the momentum for recovery in the economy was spreading gradually, with business sentiment of large manufacturers improving substantially and that of nonmanufacturers and small firms continuing to improve. One member, however, said that the improvement in business sentiment of nonmanufacturers and small firms remained modest and therefore it could not be said that the momentum for economic recovery had spread much. A different member pointed out that the pace of decline in the break-even point of firms was starting to slow, and said that there was still uncertainty regarding the prospects for a further improvement in business sentiment and profitability in the near future.

Members agreed that business fixed investment was recovering gradually, against the background of the continuing improvement in corporate profits. Some members said that, although real business fixed investment had been revised significantly downward in the second preliminary estimates of GDP statistics for the July-September quarter, the gradual recovery trend of business fixed investment remained unchanged, as seen in the following developments. First, shipments of capital goods had started to increase. Second, machinery orders, which were a leading indicator of business fixed investment, were increasing substantially again. And third, the December 2003 Tankan showed that business fixed investment plans for fiscal 2003, particularly those of nonmanufacturers and small and medium-sized firms, had been revised upward.

One member said that there were some signs of recovery in private consumption, due to an increase in overtime payments and also to an improvement in consumer sentiment reflecting developments such as the rise in stock prices. A different member saw private consumption as likely to remain virtually flat for the time being since household income was unlikely to improve markedly, as firms would continue to restrain labor costs. Regarding indicators released recently, however, the member said that there were some signs of firmness in private consumption such as solid sales of durable consumer goods, particularly digital appliances. Another member pointed out that a decline in the personal saving rate, and withdrawals from households' savings, had been observed, and cited these developments as factors behind the firmness in private consumption despite the lack of substantial improvement in the income situation. The member continued that the risk that private consumption might weaken in the near future should be borne in mind.

Some members said that an increase in the burden on households of pension costs due to the planned reform of the pension system might affect household and corporate sentiment, and therefore further discussion on the reform should be followed closely.

With regard to price developments, members discussed the fact that the year-on-year change in the consumer price index (CPI; excluding fresh food) had become positive in October for the first time in five and a half years. Many members said that the CPI was basically projected to continue falling slightly on a year-on-year basis. This was because the recent developments in the CPI were largely attributable to temporary factors such as the rise in medical treatment costs and tobacco tax, as well as in rice prices due to the cool summer of 2003, although they reflected to some extent the narrowing of the output gap, which was due to the economic recovery, and the gradual moderation by firms of their low-price strategy. One member said that due attention should be paid to the possibility that the rise in international commodity prices and prices in China might affect consumer prices in Japan. A different member said that whether the employment and income situation would follow a steady upward trend was the key to predicting future developments in the CPI.

Regarding the year-on-year change in the GDP deflator, which had been revised to a slower pace of decline, some members expressed the view that it was necessary to examine the possible effects of this revision on forecasts of the real GDP growth rate.

Many members agreed that the above assessment of the overall economy and price developments was mostly in line with the standard scenario in the Outlook and Risk Assessment of the Economy and Prices released on October 31, 2003.

B. Financial Developments

Some members said that the recent appreciation of the yen was largely attributable to the depreciation of the U.S. dollar against major currencies reflecting concerns about the "twin deficits" in the United States and geopolitical risks related to the situation in Iraq. One member said that, given the strong momentum of the U.S. economic recovery, the current account deficit in the United States was likely to increase for the time being, and therefore there was a risk that the U.S. dollar might depreciate further.

Some members expressed the view that the effects of the appreciation of the yen on economic activity and corporate sentiment had been limited so far, judging, for example, from the results of the December 2003 Tankan. However, members agreed that developments in the foreign exchange market and their effects on the economy required close monitoring.

Some members commented on developments in Japanese stock prices. One member said that the current level of stock prices did not deviate greatly from economic fundamentals. A different member said that firms' profitability would have to improve further for stock prices to rise higher, since the stock market had already factored in positive developments in the economy.

Many members expressed the view that, due to the Bank's flexible provision of liquidity, the money market was extremely stable even after the decision to temporarily nationalize Ashikaga Bank, and it remained easy despite the approach of the year-end.

Some members expressed views on the background of the somewhat slower pace of growth in the money stock. These members said that, for the money stock, especially M2+CDs, to grow at a faster pace, financial institutions' lending would have to increase, but an increase in their lending was unlikely, despite the recovery trend of the economy. This was because firms were giving priority to reducing their interest-bearing liabilities in the current situation where structural adjustments were in progress. One of these members expressed the view that, although there was to some extent a relationship between the growth rate of M2+CDs and economic activity over a very long period, this relationship had become unstable since the second half of the 1990s. A different member said that there had been a positive correlation between the growth rate of the money stock and the instability of the financial system in the past several years. In other words, the growth rate of the money stock rose when concerns about financial system stability heightened and declined when these concerns abated. Another member said that it was not appropriate to assess the effects of monetary policy based on the growth rate of the money stock when the economy was in the process of structural adjustment.

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 guideline for money market operations with the target range of "around 27 to 32 trillion yen" for the outstanding balance of current accounts at the Bank, given the assessment that the economy was recovering gradually.

A few members said that it was important that the Bank maintain market stability by providing ample funds, using the contingency clause when necessary, although financial institutions had generally been raising funds maturing over the year-end smoothly. One member said that demand for funds with longer maturities, such as those maturing over the fiscal year-end, remained strong even in the present situation where the money market was stable. The Bank should conduct money market operations taking market needs into account.

One member expressed the view that, among various monetary indicators, the Bank should focus on developments in the monetary base in conducting monetary policy. The member continued that monetary policy aiming to increase the monetary base steadily in line with medium- to long-term growth in nominal GDP would contribute not only to overcoming deflation but also to stabilizing long-term interest rates. A different member expressed the view that conducting monetary policy focusing on the monetary base would pose various problems for the following reasons. First, it was difficult for the Bank to directly control the amount of banknotes in circulation, which accounted for about 70 percent of the monetary base. And second, given that the current level of the ratio of the amount of banknotes in circulation to nominal GDP significantly exceeded its long-term trend in the past, the amount of banknotes might decrease as the financial system stabilized.

Members exchanged views regarding purchase of ABSs, on which the Bank staff had reported. With respect to the conditions regarding purchase of ABSs, some members expressed the view that it would be desirable that the Bank review whether or not they could be modified based on the evaluation of actual purchasing operations so far and opinions of market participants expressed at a workshop on securitization hosted by the Bank. The Bank had decided, when the scheme for purchase of ABSs was introduced, that it would review the conditions giving due consideration to factors such as developments in the ABS market. All members agreed with this view. One member said that in reviewing the conditions the Bank should hold firmly to the basic principle of the scheme at the time it was introduced. Some members said that the primary purpose of reviewing them should be to promote sound development of the ABS market, not to increase the amount of ABSs purchased by the Bank.

Based on these discussions, the chairman instructed the Bank staff to review the conditions regarding purchase of ABSs and report the result at the next Monetary Policy Meeting. Members agreed unanimously to make public these instructions by issuing the attached statement (see Attachment 1).

IV. Remarks by Government Representatives

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

  1. (1) Japan's economy was showing an incipient recovery, particularly in the corporate sector, with business fixed investment increasing and corporate profits continuing to improve.
  2. (2) The government would formulate the budget for fiscal year 2004 in such a way as to promote the realization of a vigorous economy and society and the establishment of a sustainable fiscal structure. The government would maintain its basic policy of formulating a budget that reflected the government's strong determination to carry out reforms, and would further promote structural reforms.
  3. (3) Deflation continued, while the economy was showing an incipient recovery. The longer deflation continued, even if it was moderate, the more difficult it would be to overcome, because deflationary concern would intensify and become more deeply rooted. The Bank had been conducting monetary policy to overcome deflation. The government would like the Bank to deliberate further on the possibility of measures that would contribute to dispelling deflationary concern, and conduct effective monetary policy.
  4. (4) The government would like the Bank to continue giving due consideration to developments in the economy and financial markets, including developments in interest rates and exchange rates, and conduct monetary policy flexibly to ensure the stability of the financial system.
  5. (5) The corporate financing environment was projected to become more severe toward the year-end. The government would like the Bank to conduct monetary policy in a flexible manner should there be a surge in liquidity demand.

The representative from the Cabinet Office made the following remarks.

  1. (1) Japan's economy was showing an incipient recovery. The government considered that it was necessary to continue to monitor closely developments in financial markets, such as changes in stock prices and exchange rates.
  2. (2) The two most important tasks for Japan's economy were to overcome deflation swiftly and to achieve a self-sustained economic recovery led by domestic demand. To this end, the government was pursuing early implementation of "Basic Policies for Economic and Fiscal Policy Management and Structural Reform 2003," which stated that deflation would be overcome after an intensive adjustment period through measures taken by the government with the Bank. The Cabinet approved on December 5, 2003 "Guidelines for Formulation of the FY 2004 Budget," which confirmed that the government would maintain its basic policy of formulating a budget that reflected its strong determination to carry out reforms. The government would also compile "The Fiscal 2004 Economic Outlook and Basic Stance for Economic and Fiscal Management" and revise "Structural Reform and Medium-Term Economic and Fiscal Perspectives."
  3. (3) The government placed Ashikaga Bank under special public management on December 1, 2003, in order to prevent a financial crisis. The government was doing its utmost to ensure the stability of the financial markets and the economy of the region where the bank was operating. The government would continue taking every necessary step to ensure financial system stability.
  4. (4) The Bank had clarified its commitment based on the CPI to continue the current quantitative easing policy. The government would like the Bank to conduct money market operations appropriately and flexibly by, for example, utilizing operational tools that were more effective, and at the same time take into account developments in financial markets. The government would also like the Bank to examine the basic framework for the conduct of monetary policy, including issues related to price stability in the current economic situation, and conduct more effective monetary policy in order to overcome deflation in fiscal 2005.

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 32 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 2).

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 32 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" in the Monthly Report of Recent Economic and Financial Developments (consisting of "The Bank's View" and "The Background"), and put it to the vote.

The Policy Board approved, by unanimous vote, "The Bank's View" for publication on December 16, 2003, and decided to publish the whole report on December 17, 20036.

  1. 6The English version of the whole report was published on December 18, 2003.

VII. Approval of the Minutes of the Monetary Policy Meetings

The Policy Board approved unanimously the minutes of the Monetary Policy Meetings of October 31, 2003, and November 20 and 21 for release on December 19, 2003.

VIII. Approval of the Scheduled Dates of the Monetary Policy Meetings in January-June 2004

At the end of the meeting, the Policy Board approved the dates of the Monetary Policy Meetings to be held in the period January-June 2004, for immediate release (see Attachment 3).

Attachment 1

For immediate release

December 16, 2003
Bank of Japan

Review of the Conditions regarding the Purchase of Asset-Backed Securities

The development of asset-backed securities (ABS) market contributes to sustainable economic growth through the improvement of financial intermediary function as well as to the permeation of the effects of monetary easing through the economy. Based on such recognition and with a view to promoting its long-term development, the Bank of Japan has been supporting various efforts of market participants to improve the infrastructure of the ABS market.

The purchase of ABSs by the Bank is part of such support. When the scheme for the purchase was introduced, the Bank expressed that it was prepared to review the conditions regarding the purchase of ABSs with due consideration to the sound development of the ABS market and the financial soundness of the Bank. At the Monetary Policy Meeting held on December 15 and 16, the Bank staff briefed Policy Board members on the ABS market situation and the actual purchase of ABSs by the Bank as well as the opinions of market participants expressed at a workshop on securitization hosted by the Bank. At the Meeting, views were expressed that it should be desirable to review whether or not the conditions regarding the purchase of ABSs be modified based on the evaluation of actual purchasing operations so far.

The Chairman instructed the Bank staff to review the conditions regarding the purchase of ABSs and report the result at the next Monetary Policy Meeting.

Attachment 2

For immediate release

December 16, 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:

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 32 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.

Attachment 3

For immediate release

December 16, 2003
Bank of Japan

Scheduled Dates of Monetary Policy Meetings in January - June 2004

Table : Scheduled Dates of Monetary Policy Meetings in January - June 2004
  Date of MPM Publication of Monthly Report
(The Bank's View)1,2,3		 Publication of MPM Minutes
Jan. 2004 19 (Mon.), 20 (Tue.) 20 (Tue.) Mar. 2 (Tue.)
Feb. 5 (Thur.), 6 (Fri.) 6 (Fri.) Mar. 19 (Fri.)
26 (Thur.) -- Apr. 14 (Wed.)
Mar. 15 (Mon.), 16 (Tue.) 16 (Tue.) Apr. 14 (Wed.)
Apr. 8 (Thur.), 9 (Fri.) 9 (Fri.) May 25 (Tue.)
28 (Wed.) -- June 18 (Fri.)
May 19 (Wed.), 20 (Thur.) 20 (Thur.) June 30 (Wed.)
June 14 (Mon.), 15 (Tue.) 15 (Tue.) To be announced
25 (Fri.) -- To be announced
  1. "The Bank's View" of "Monthly Report" is scheduled to be published at 3:00 p.m. (this schedule is subject to change on certain grounds such as late closing of the meeting).
  2. Full text of "Monthly Report" will be published at 2:00 p.m. on the next business day of the publication of "The Bank's View" (English translation will be published at 4:30 p.m. on the second business day of the publication of "The Bank's View").
  3. "The Bank's View" of "Outlook and Risk Assessment of the Economy and Prices (April 2004)" will be published at 3:00 p.m. on Wednesday, April 28 (The whole report including the background will be published at 2:00 p.m. on Friday, April 30).