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BOJ minutes show Kuroda had to act swiftly to safeguard price goal

Kazuhiro Nogi | AFP | Getty Images

Some Bank of Japan policymakers said inflation could dip below 1 percent due to falling energy prices at a meeting in early October, which helps explain why governor Haruhiko Kuroda chose to expand monetary stimulus in a tightly split decision last week.

A few members also expressed concern that inflation could be slowing due to a lack of momentum in consumer spending, minutes of the central bank's Oct. 6-7 meeting showed on Thursday.

Most members agreed that inflation is likely to pick up again as the output gap improves, which could be the reason why four of the BOJ's nine board members voted against last Friday's shock decision to ease policy further.

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The minutes offered no hints of the BOJ's surprise decision on Oct. 31 to expand its government debt purchases, but they do show more concern about the price outlook in the short term.

"Some members noted that, depending on developments in energy prices, the year-on-year rate of increase in CPI might temporarily fall below 1 percent," the minutes said.

At the Oct. 6-7 meeting, the BOJ left its quantitative easing program unchanged despite lingering weakness after a sales tax increase in April.

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At a subsequent meeting on Oct. 31, the BOJ stunned global investors by increasing its government debt and risk asset purchases in a tightly split 5-4 vote that raised questions about whether factions on the board could hamper future policy decisions.

Many economists took the extra easing as a stark admission that the BOJ's attempt to guide consumer inflation to around 2 percent sometime next fiscal year is not going well.

Kuroda had previously stated that there was no chance inflation will fall below 1 percent, excluding the impact of a sales tax hike in April.

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However, a large decline in oil prices made Kuroda's prediction increasingly unlikely, which could have swayed some members on the board.