Global tension raises debate on BoJ's relaxation in March

TOKYO (Reuters) – Bank of Japan policymakers debated the possibility of beefing up monetary stimulus during the review of their key rate this month, as rising risk abroad weighed on the fragile economy of the country, revealed Tuesday a summary of the views of the meeting.

While many board members have maintained their views on the moderate growth of the Japanese economy, some have worried about the effect of slowing global demand and the potential for lower consumption as a result of rising demand. scheduled sales tax in October.

"In the current situation where the risks of deterioration materialize, the BOJ should be ready to react," said one of the nine members of the central bank's board of directors.

"If there is concern that the momentum of inflation is lost, the BOJ should relax its policy decisively," said the MP.

Another member said that the BOJ should act "preventively" if the evolution of the economy and prices deteriorated, says the summary.

Others, however, were more cautious about completing an already mbadive stimulus package. Some said maintaining the current policy was the best approach given the increasing cost of prolonged easing, according to the resume.

"In a situation where a virtually zero lower limit exists, it is possible that the effect of monetary easing via a further decline in government bond yields may be more limited than before." , said a member of the board of directors.

At the March 14-15 meeting, the Bank of Japan maintained monetary policy, but downgraded its vision of exports and production to be closer to the impact of slowing global growth.

"Japan may be facing growing signs of recession, depending on the evolution of the economic situation abroad and the expected rise in the tax on domestic sales," said a member cited in the summary.

The BOJ faces a dilemma. Years of heavy silver printing have dried up the liquidity of the market and weighed on the profits of commercial banks, highlighting the growing risks of prolonged laxity.

And yet controlled inflation has left the BOJ far behind its US and European counterparts in the fight against crisis policies, and with a shortage of ammunition to fight any sharp rise in the yen that could hinder an export-led economic recovery .