Monetary Policy

Home > Monetary Policy > Monetary Policy Meetings > Minutes of the Monetary Policy Meetings 2004 > Minutes of the Monetary Policy Meeting on December 16 and 17, 2004

Minutes of the Monetary Policy Meeting

on December 16 and 17, 2004
(English translation prepared by the Bank's staff based on the Japanese original)

January 24, 2005
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 Thursday, December 16, 2004, from 1:59 p.m. to 4:25 p.m., and on Friday, December 17, from 9:00 a.m. to 12:32 p.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
Ms. M. Suda
Mr. S. Nakahara
Mr. H. Haru
Mr. T. Fukuma
Mr. A. Mizuno

Government Representatives Present Mr. I. Ueda, Senior Vice Minister of Finance, Ministry of Finance2
Mr. M. Ishii, Deputy Vice Minister for Policy Planning and Coordination, Ministry of Finance3
Mr. H. Kato, Deputy Director General for Economic Assessment and Policy Analysis, Cabinet Office
Reporting Staff Mr. E. Hirano, Executive Director (Assistant Governor)4
Mr. M. Shirakawa, Executive Director
Mr. A. Yamamoto, Executive Director5
Mr. H. Yamaguchi, Director-General, Monetary Affairs Department
Mr. Y. Maehara, Adviser to the Governor, Monetary Affairs Department
Mr. S. Uchida, Senior Economist, Monetary Affairs Department
Mr. H. Yamaoka, Senior Economist, Monetary Affairs Department
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 Board6
Mr. K. Murakami, Director, Secretariat of the Policy Board
Mr. K. Kamiyama, Senior Economist, Monetary Affairs Department
Mr. N. Takeda, Senior Economist, Monetary Affairs Department

  1. The minutes of this meeting were approved by the Policy Board at the Monetary Policy Meeting held on January 18 and 19, 2005 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. I. Ueda was present on December 17.
  3. Mr. M. Ishii was present on December 16.
  4. Mr. E. Hirano was present on December 17 from 9:00 a.m. to 10:47 a.m.
  5. Mr. A. Yamamoto was present on December 17 from 9:00 a.m. to 10:54 a.m. and from 12:14 p.m. to 12:32 p.m.
  6. Mr. T. Takei was present on December 17 from 9:00 a.m. to 10:54 a.m.

I. Summary of Staff Reports on Economic and Financial Developments7

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 17 and 18, 2004.8 The outstanding balance of current accounts at the Bank moved in the 30-35 trillion yen range.

B. Recent Developments in Financial Markets

Against the background of the Bank's provision of ample liquidity, the weighted average of the uncollateralized overnight call rate was generally at around zero percent. Interest rates on term instruments had been steady at low levels.

Long-term interest rates had been moving at around 1.4 percent recently, as views about the outlook for Japan's economy had become more cautious reflecting weaker-than-expected economic indicators, such as industrial production.

Japanese stock prices had fallen in response to the weaker-than-expected economic indicators and appreciation of the yen against the U.S. dollar, and then increased partly reflecting steady developments in U.S. stock prices. Recently, the Nikkei 225 Stock Average was moving at around 11,000 yen, almost the same level as at the time of the previous meeting.

The yen had appreciated against the U.S. dollar reflecting concerns over the U.S. "twin deficits," and then depreciated in response to the weaker-than-expected Japanese economic indicators. Recently, it was being traded in the range of 103-106 yen, almost the same range as at the time of the previous meeting.

C. Overseas Economic and Financial Developments

The U.S. economy continued to expand supported by domestic private demand components such as household spending and business fixed investment. The growth rate of real GDP on an annualized quarter-on-quarter basis for the July-September quarter of 2004 was revised upward to a preliminary estimate of 3.9 percent from the advance estimate of 3.7 percent. As for the outlook, the economy was expected to continue expanding.

In the euro area, the economy remained on a modest recovery trend led mainly by household spending and business fixed investment. However, partly due to the appreciation of the euro, external demand and production were increasingly sluggish and the employment situation was not improving.

As for East Asian economies, in China both domestic and external demand continued to expand strongly. The year-on-year rate of increase in the year-to-date total of fixed asset investment remained at high levels despite the measures taken by public authorities to contain the overheating of the Chinese economy. The NIEs and ASEAN economies continued to expand, but the pace of expansion was slowing. As for price developments, the upward trend in the year-on-year rate of increase in the consumer price index (CPI) in many East Asian economies, including China, was coming to a halt due mainly to a pause in the rise in food prices.

In U.S. and European financial markets, stock prices remained relatively firm in the intermeeting period. Long-term interest rates in the United States continued to move at almost the same level as at the time of the previous meeting, while they were declining in European countries against the background of appreciation of their currencies and uncertainty about the economic outlook.

In financial markets in many emerging economies, stock prices showed weak developments, while the yield differentials between their sovereign bonds and U.S. Treasuries narrowed, and their currencies had appreciated slightly reflecting the weakening of the U.S. dollar.

D. Economic and Financial Developments in Japan

1. Economic developments

Exports had recently been more or less flat due to global supply-demand adjustments in IT-related sectors although overseas economies had been on an expanding trend. Exports to the United States were essentially flat in October, after declining slightly in the July-September quarter. Exports to China had picked up, while those to the NIEs and ASEAN economies had decreased. Exports to the European Union (EU) were more or less flat.

Business fixed investment had been on a rising trend. Shipments of capital goods (excluding transport equipment) had recently dropped somewhat, particularly those of semiconductor manufacturing equipment, reflecting adjustments in IT-related sectors. Machinery orders (private demand, excluding shipbuilding and orders from electric power companies), a leading indicator of business fixed investment, also dropped in the July-September quarter and in October, after surging in the April-June quarter. However, construction starts (floor area, private, nondwelling use), another leading indicator, had been on an uptrend in a wide range of industries. In addition, the December Tankan (Short-Term Economic Survey of Enterprises in Japan) indicated that business fixed investment plans for fiscal 2004 had been revised upward against the background of the ongoing increase in corporate profits, although business sentiment seemed to have become somewhat cautious.

Private consumption had been steady. Consumption of nondurable goods was somewhat sluggish due partly to adverse weather, while that of durable goods and services had been firm. Indicators for consumer sentiment continued to be on a recovery trend on the whole.

Production dropped in October from the monthly average of the July-September quarter, particularly in electronic parts and devices, after inching down in the July-September quarter. Inventories were more or less flat in October, after increasing in the July-September quarter. Developments in inventories differed according to the type of goods: inventories of materials-related goods continued to decline, mainly due to the decrease in spare production capacity; while those of electronic parts and devices increased. Pressures for inventory adjustments of electronic parts and devices had intensified somewhat. This was mainly because digital appliance manufacturers that had made aggressive production plans aiming at increasing their market share had reduced orders for electronic parts and devices, and global demand for mobile phones and personal computers had weakened to some extent. Given that the growth trend in IT-related demand, including that for digital appliances, had been maintained, adjustments of inventories of these goods were unlikely to be as large as during the bursting of the IT bubble in 2001. However, it was becoming more likely that the inventory adjustments would persist to some extent, and therefore, developments in IT-related demand, particularly the outcome of year-end sales at home and abroad, required close monitoring for the time being.

As for the employment and income situation, job offers and the unemployment rate had been improving, albeit with some fluctuations. The number of employees was also on an uptrend. Wages were still on a downtrend in terms of the average per person, mainly due to the rise in the proportion of part-time workers, but the rate of decline had been diminishing gradually, particularly in special payments. As a result, household income had stopped declining according to the Monthly Labour Survey.

On the price front, domestic corporate goods prices had been rising due to the strengthening of commodity prices at home and abroad and to the improvement in supply and demand conditions. Consumer prices (excluding fresh food) had been declining slightly on a year-on-year basis. Consumer prices were projected to continue falling slightly year on year as supply and demand conditions were likely to remain loose for the time being, although they were improving, and public utility charges were declining.

Based on the above developments, it was judged that Japan's economy continued a recovery trend. However, the possibility could not be ruled out that, as a result of weak developments in production, it might be judged in the Reference Dates of Business Cycle, which focused on production and inventory data, that the economy had already reached its peak recently.

2. Financial environment

As firms continued to reduce their debts, the improvement in credit demand in the private sector seemed to have stopped temporarily. Under these circumstances, the rate of decline in lending by private banks had not changed recently. However, their lending was still on an improving trend. The lending attitude of private banks was becoming more accommodative, and that of financial institutions as perceived by firms, including small firms, had been improving.

With regard to financing through capital markets, the issuing environment for CP and corporate bonds continued to be favorable, as seen in low and stable credit spreads. As a result, the amount outstanding of CP and corporate bonds issued continued to be above the previous year's level.

The year-on-year growth rate of the monetary base had been at the 4.0-5.0 percent level, and that of the money stock (M2+CDs) was around 2.0 percent. The growth of banknotes in circulation increased slightly in November due to the introduction of the new series of banknotes.

  1. 7Reports were made based on information available at the time of the meeting.
  2. 8The 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 30 to 35 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 current state of Japan's economy, members concurred that, although there seemed to be somewhat weak movements, mainly in production, the economy was just at a temporary pause and it continued a recovery trend. They also agreed that the economy would continue to recover.

Members agreed that overseas economies, while decelerating slightly from their high growth so far, would continue to expand.

Many members expressed the view that the U.S. economy had probably moved out of its temporary soft patch, and that economic expansion would continue, for the following reasons. First, the growth rate of real GDP for the July-September quarter had increased compared to the April-June quarter. Second, although it was too early to evaluate developments in sales for the Christmas shopping season, private consumption so far had been firm, partly because crude oil prices had stopped rising. Third, business fixed investment had been on an increasing trend, as high corporate profits continued. And fourth, the pace of increase in the number of employees, which had slowed temporarily in summer 2004, had recovered overall. As a factor behind the soft patch being only temporary, some members said that it could be pointed out that the effects of monetary easing as seen in the stability of long-term interest rates had not waned even in a situation where the Federal Open Market Committee (FOMC) was raising the target for the federal funds rate. A few members, on the other hand, noted that there was a risk of U.S. economic growth decelerating again if concern about inflationary risks grew and long-term interest rates showed unstable movements. A different member said that as there were indicators showing a deterioration in consumer confidence, it was necessary for the time being to continue paying attention to factors such as the possibility of further downward pressure on the economy stemming from continued high crude oil prices. In this regard, the member added that Christmas sales figures would be a focus of attention.

With regard to the Chinese economy, many members said that both domestic and external demand continued to expand significantly. As for fixed asset investment, which continued to show high growth, one member said that it was at a stage where it would be appropriate to examine the effects of a series of measures to contain the overheating of the economy, including the raising of the central bank benchmark deposit and lending rates by the People's Bank of China at the end of October. A few members noted that as prices regained stability, the Chinese government was recently tolerating faster economic growth, and intensive measures to contain the overheating of the economy, including administrative guidance, might no longer be necessary.

Based on the above assessment of developments in overseas economies, members agreed that Japan's exports were likely to start increasing again in the near future. As for the current state of exports, which had been more or less flat, a few members said that exports had not regained momentum because, although the effects of the deceleration of overseas economies had abated, global adjustments in IT-related sectors continued and in some industries with low spare production capacity, for example the steel and chemical industries, suppliers continued to give priority to domestic firms over overseas markets.

Many members said that business fixed investment continued to increase recently and the increase was expected to continue, spreading to a wider range of industries and firms of various sizes, given the following: a positive quarter-on-quarter rate of change in private nonresidential investment in the second preliminary estimate of GDP for the July-September quarter; and a further upward revision in business fixed investment plans for fiscal 2004 in the December Tankan. Some members raised the following as factors behind firms' strong appetite for business fixed investment. First, there had been progress in adjustments of excess capital stock, labor, and debt. Second, corporate profits had been increasing substantially, partly supported by improvement in firms' net financial income. Third, the lending attitude of financial institutions had been more accommodative. And fourth, investment in buildings and land had started to increase, while land prices in prime locations were bottoming out. One member, however, said that many firms in IT-related sectors had recently postponed implementation of some of their business fixed investment, and as this might not have been fully reflected in the December Tankan, business fixed investment plans as indicated in it should be viewed with a degree of caution. A different member said it should be noted that many firms expressed the view that it was difficult to foresee future developments in the appreciation of the yen and rises in crude oil and materials prices, and the extent of their effects on corporate profits.

Members agreed that private consumption had been steady. With regard to the quarter-on-quarter growth rate of private consumption for the July-September quarter, which had been revised downward in the second preliminary estimate of GDP, one member expressed the opinion that the lower figure in the second estimate was more reasonable, as the member had felt that the growth rate in the first estimate was considerably above the actual level of growth. A different member said that although recent sales indicators, for example, had been somewhat sluggish due partly to adverse weather conditions, private consumption was projected to recover gradually, as household income was expected to show signs of a gradual increase.

Many members said that production was unlikely to increase markedly in the near future mainly for the following reasons. First, adjustments in IT-related sectors were likely to continue for a while, as global demand for mobile phones and personal computers had been weakening and sales projections made by domestic manufacturers for their digital appliances were slightly overoptimistic. Second, many firms in materials-related industries were already operating at almost full production capacity. And third, their lack of spare capacity might have been affecting production in other industries such as automobiles.

In relation to the outlook for production, many views were put forward regarding developments in IT-related sectors. Most members said that production in IT-related sectors was unlikely to decline significantly as at the time of the bursting of the IT bubble in 2001, given the following factors. First, demand for digital appliances was increasing. Second, IT-related goods were being used in more types of goods, such as electronic parts for automobiles, than before. Third, adjustments of inventories of IT-related goods had started at a relatively early stage in terms of the levels of inventories accumulated. And fourth, the U.S. Nasdaq composite index, which included many IT-related stocks, was on an uptrend. Some of these members expressed the view that adjustments in production of IT-related goods would ease off in the first half of 2005, and accordingly production as a whole, including that in IT-related sectors, would start to increase. In response to this, a few members said that a judgment concerning when production would start recovering should be based on close examination of future developments such as Christmas sales figures, given the following factors. First, it was very difficult to forecast future developments in production of IT-related goods because demand for such goods fluctuated greatly. And second, adjustments in IT-related sectors were becoming more severe recently. Some members including these members said that there was a risk that adjustments in IT-related sectors might be further prolonged, and in this case it should be noted that business and consumer sentiment might deteriorate.

With regard to the employment and income situation, members concurred that household income had stopped declining, as the number of employees was on an uptrend and wages had almost stopped falling, with a continuing improvement in various indicators reflecting labor market conditions such as job offers, the unemployment rate, and the diffusion indexes of employment conditions in the Tankan survey. One member said that the upward revision in the number of new graduates firms planned to recruit in the December Tankan showed that firms were becoming more active in recruiting employees. Another member said that the upward revision in the number of new graduates financial institutions planned to recruit was also a positive development for the economy as a whole. A different member noted the possibility that the mismatch between supply and demand of labor might be diminishing, citing the fact that the average length of time that people were unemployed was becoming shorter. As for the outlook, members concurred that household income was likely to show signs of a gradual increase. One member said, however, that if developments in production remained weak, their effects on the employment and income situation would require close monitoring.

Members agreed that there was no significant change in the trend of prices. While domestic corporate goods prices continued to rise due to the strengthening of commodity prices at home and abroad and the improvement in supply and demand conditions, consumer prices had been declining slightly on a year-on-year basis. A few members, however, pointed out that the year-on-year rate of decline had been diminishing gradually when institutional factors were taken into account. As for the outlook for consumer prices, members agreed that they would continue falling year on year for the time being. This was because, while the rise in crude oil prices had already to a great extent been passed on in prices of some products such as gasoline, the negative impact of rice prices was expected to increase for some time and the reduction in fixed telephone charges was likely to be reflected in the CPI. One member said that if the reduction in fixed telephone charges was reflected in the CPI, its effect was likely to be fairly large. However, given that price indexes were often affected by such technical factors, it was important to assess the price situation accurately bearing this in mind and examining a wide range of information. One member explained in relation to the background to the current situation, where prices at the consumer level were not rising while prices at the corporate level were, that in addition to the higher productivity firms were achieving and their continuing tendency to restrain labor costs, consumers were sensitive to prices, which made it difficult for some firms to raise consumer goods prices. A few members including this member said that attention should continue to be paid to whether there were changes in firms' price-setting stance with regard to prices at the consumer level, given that at the corporate level corporate service prices (1995 base), as well as domestic corporate goods prices, were increasing year on year. One member said that prices of steel plates were forecasted to rise further in fiscal 2005 due to the surge in shipping charges and the increase in prices of coal and iron ore. Moreover, this member expressed the view that there was less room than in the past for further absorbing the rise in costs through higher productivity. Therefore, firms might have to decide at some point in the future whether they would pass on the rise in costs in sales prices or accept a decline in profits.

B. Financial Developments

One member said that the bond market had not moved greatly even after the release of the December Tankan. This was because positive and negative views about the December Tankan were balanced in the market: some considered that certain results, such as those for firms' business fixed investment plans, were encouraging, while others were concerned about the deterioration in the diffusion index for future business conditions. A different member commented that the disparity between the views of market participants and the Bank with regard to the outlook for the Japan's economy seemed to have narrowed significantly since the release of the December Tankan. Some members said that market participants seemed to have been encouraged to invest in bonds partly due to the low volatility of the financial market overall.

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

On the monetary policy stance for the immediate future, members agreed that, based on the assessment of the current economic and financial situation, it was appropriate to maintain the current guideline for money market operations with the target range of "around 30 to 35 trillion yen" for the outstanding balance of current accounts at the Bank.

With regard to the conduct of money market operations for the immediate future, many members expressed the view that, although market participants were feeling more strongly that there was an abundance of liquidity due mainly to the further decrease in anxieties about the financial system, it would be feasible to maintain the outstanding balance of current accounts at the Bank within the target range by devising ways to enhance the conduct of short-term funds-supplying operations. This was because there had been a surplus of funds due to seasonal factors affecting current account balances, and accordingly the amount of funds the Bank needed to provide in its conduct of money market operations had been relatively small recently. A few members said that a reduction of the target range could be perceived as a sign of a tightening of monetary policy, and that in the current situation where the economy was in a delicate stage, it was important to steadily maintain the outstanding balance of current accounts at the Bank within the target range. One member expressed the opinion that in the future when market participants' concern about the availability of liquidity started to decrease following the upcoming full removal of blanket deposit insurance, a gradual reduction of the target range, after careful consideration of the timing, might be worth considering, although the Bank would firmly maintain the current quantitative easing policy framework of providing ample liquidity and the resultant zero interest rate in a situation where deflation continued. A different member basically agreed with this opinion, and said that in the event the Bank actually considered changing the target range, various factors, such as the economic situation at the time, would need to be taken into account.

One member expressed the view that the current quantitative easing policy influenced interest rates in three ways. First, medium- and long-term interest rates had declined as a result of the Bank's commitment that the zero interest rate would continue for a certain period. Second, the increases in the target range for the outstanding balance of current accounts at the Bank had strengthened market participants' confidence in its commitment in terms of policy duration. And third, the disparity between banks' credit spreads had narrowed as a result of various types of money market operations conducted by the Bank. A few other members generally agreed with this view, and added that one of the effects the current policy had had on economic activity was that the narrowing of firms' credit spreads had promoted balance-sheet restructuring. A different member said that, although the member did not deny these effects, those other than the one concerning the commitment in terms of policy duration did not seem to be very significant. With regard to the side effects of the quantitative easing policy, a few members raised the following: an increase in moral hazard among borrowers; a decline in the functioning of the money market; a decrease in the Bank's flexibility in its conduct of monetary policy; and a weakening of fiscal discipline. Members including these concurred that in the current situation these side effects were not significant in comparison with the positive effects of the policy.

Regarding the shift to the chain-linking method for the calculation of the GDP statistics, one member suggested that it would be necessary to make clear its effect on members' forecasts of real GDP in the Outlook for Economic Activity and Prices (hereafter the Outlook Report) released in October 2004. A few members said that it might be better to indicate the effects of the shift by a numerical value when the Bank presented its interim assessment of the Outlook Report in "The Bank's View" in the Monthly Report of Recent Economic and Financial Developments to be issued in January 2005. One member said that one option could be for members to make a new set of forecasts this time as an exceptional measure. In response to this, another member said that, since the aim of publishing the Outlook Report was to make clear the Bank's basic thinking with regard to its outlook for economic activity and prices, it would not be appropriate to act in a manner that might result in market participants' attention focusing on the figures of members' forecasts. Based on these discussions, a few members said that members should discuss at the Monetary Policy Meeting in January 2005 how the Bank would communicate its thinking to market participants when it released its interim assessment.

IV. Remarks by Government Representatives

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

  1. (1) The government was making final adjustments to the budget proposal for fiscal 2005 for the forthcoming Cabinet meeting on December 24, 2004. Budget consolidation was essential for enhancing public and market confidence concerning the nation's budgetary health so as to achieve sustainable economic growth. From this viewpoint, the government was formulating the budget proposal based on the following points. First, the government would implement prioritization and efficiency improvement exercises in budget allocation more strictly than ever before, maintaining and strengthening its commitment to its fiscal restructuring policy, under which general expenditures and general account expenditures had essentially been contained at or below the level of the previous fiscal year's budget. And second, it would firmly aim at reducing issuance of government bonds to below the level of the previous fiscal year.
  2. (2) Although the government's assessment was that Japan's economy continued to recover, some market participants were taking a cautious view of the outlook for the economy as some weak movements had been seen recently. Under these circumstances and as deflation persisted, the government considered that it was important to maintain a firm stance in order to overcome it. Therefore, the government would like the Bank to continue to make clear its stance that it would firmly maintain the quantitative easing policy.
  3. (3) Moreover, in order to ensure the sustainability of the current economic recovery led by private demand, the government considered that the role of monetary policy remained vital. The government would therefore like the Bank to deliberate on new measures that would maintain for the foreseeable future market expectations that the accommodative financial environment would continue.

The representative from the Cabinet Office made the following remarks.

  1. (1) Japan's economy was recovering at a moderate pace recently, while some weak movements were seen. The government expected that in fiscal 2005 the moderate economic recovery, led mainly by private demand, would continue and that the economy would make progress toward overcoming deflation. As for recent price developments, moderate deflation was continuing, as seen in the fact that the year-on-year rate of change in consumer prices remained flat, at slightly below zero percent. The quarter-on-quarter growth rate of nominal GDP had been negative for two consecutive quarters, April-June and July-September.
  2. (2) The government was deliberating accelerating and expanding structural reforms in each sector, placing emphasis on expanding private demand and employment. Its aim was to realize an economic growth path with a nominal growth rate in and after fiscal 2006 of around 2 percent or higher, as expected after the intensive adjustment period, as described in "Basic Policies for Economic and Fiscal Management and Structural Reform 2004."
  3. (3) The government would like the Bank to continue with its decisive monetary easing in order to ensure that deflation was overcome, communicating closely with the government. In overcoming deflation, it was essential that the money stock increase in the end, and the government would like the Bank to implement more effective monetary policy, including measures that would lead to more effective provision of liquidity. The government would also like the Bank to clearly present a path toward overcoming deflation, as part of further efforts to enhance the transparency of the conduct of monetary policy.

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 30 to 35 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 1).

The Bank of Japan will conduct money market operations, aiming at the outstanding balance of current accounts held at the Bank at around 30 to 35 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, Ms. M. Suda, Mr. S. Nakahara, Mr. H. Haru, Mr. T. Fukuma, and Mr. A. Mizuno.
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 decided, by unanimous vote, the text of "The Bank's View." It was confirmed that "The Bank's View" would be published on December 17, 2004 and the whole report on December 20, 2004.9The Policy Board decided, by unanimous vote, the text of "The Bank's View." It was confirmed that "The Bank's View" would be published on December 17, 2004 and the whole report on December 20, 2004.9

  1. 9The English version of the whole report was published on December 21, 2004.

VII. Approval of the Minutes of the Monetary Policy Meetings

The Policy Board approved, by majority vote, the minutes of the Monetary Policy Meetings of October 29, 2004, and November 17 and 18 for release on December 22, 2004 with eight votes in favor and one abstention.

Votes for the proposal: Mr. T. Fukui, Mr. T. Muto, Mr. K. Iwata, Mr. K. Ueda, Ms. M. Suda, Mr. S. Nakahara, Mr. H. Haru, and Mr. T. Fukuma.
Abstention: Mr. A. Mizuno.

VIII. Approval of the Scheduled Dates of the Monetary Policy Meetings in January-June 2005

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 2005, for immediate release (see Attachment 2).


Attachment 1
December 17, 2004
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 30 to 35 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 2
December 17, 2004
Bank of Japan

Scheduled Dates of Monetary Policy Meetings
in January-June 2005

table : Scheduled Dates of Monetary Policy Meetings in January-June 2005
  Date of MPM Publication of
Monthly Report
(The Bank's View)
Publication of
MPM Minutes
Jan. 200518 (Tue.), 19 (Wed.)19 (Wed.)Feb. 22 (Tue.)
Feb.16 (Wed.), 17 (Thur.)17 (Thur.)Mar. 22 (Tue.)
Mar.15 (Tue.), 16 (Wed.)16 (Wed.)May. 9 (Mon.)
Apr.5 (Tue.), 6 (Wed.)6 (Wed.)May. 25 (Wed.)
28 (Thur.)--June. 20 (Mon.)
May19 (Thur.),20 (Fri.)20 (Fri.)June. 20 (Mon.)
June14 (Tue.), 15 (Wed.)15 (Wed.)To be announced
  • Note: "The Bank's View" in the Monthly Report of Recent Economic and Financial Developments (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).
    Full text of the 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").
    "The Bank's View" in the Outlook for Economic Activity and Prices (April 2005) will be published at 3:00 p.m. on Thursday, April 28, 2005 (the whole report including the background will be published at 2:00 p.m. on Monday, May 2).