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Some BOJ members urge closer look on the cost of easing

Some Bank of Japan board members called for closer monitoring on the cost of an ultra-easy monetary policy and signaled the possibility of a future rate hike, minutes of the bank's January meeting released on March 14 showed.

The BOJ held its policy rate on March 9 and agreed to "persistently" pursue powerful easing as there was a still "long way to go" in achieving the 2% inflation target. But some members pointed out the potential side effects of years of near-zero interest rates on financial institutions' profits, minutes showed.

While there seems to be no problem with the financial system at this stage, "due attention" must focus on the impact of the flattening of the yield curve for U.S. Treasurys and the rise in funding costs for foreign currencies on financial institutions and their profits, one member said.

A member also said the bank could consider adjusting the level of interest rates if economic activity and prices continue to improve. Members agreed companies would likely raise wages and prices given a steady improvement in the output gap. They also expect inflation to rise as price increases become more widespread, the minutes showed.

But one member said the bank needs to take additional easing measures if there was a delay in achieving the inflation target due to domestic factors, minutes showed. Japan's core consumer prices rose 0.9% year over year in January, still well below the 2% target.

Another member said the bank should ramp up monetary easing measures to raise the chances of achieving the target earlier.

BOJ Governor Haruhiko Kuroda on March 9 signaled a readiness to ramp up stimulus if the economic recovery lost steam even as the bank held its settings, Reuters reported.