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Bank of Japan minutes show easing bias as members flag concerns of 'downturn'

Bank of Japan members broadly agreed to ease monetary policy further, if needed, as they raised concerns of a slowdown in the Japanese economy, minutes of the bank's July meeting showed.

Policymakers widely concurred that Japanese exports, business sentiment and employment have been hampered due to global economic slowdown as the U.S.-China trade rift continues.

As members flagged concerns of an economic "downturn" due to a negative impact of slowing external demand, they suggested that the bank should be ready to take monetary easing measures to achieve its price stability target of 2%, while keeping an eye on its financial system.

"If overseas economies deteriorate further and this has a negative impact on Japan's economic activity and prices, the Bank should respond swiftly while a monetary and fiscal policy mix is being pursued," said one of the policymakers.

"Since Japan's economy is susceptible to the U.S.-China trade friction and the inflation rate is far from [2%], it would be necessary for the Bank to consider the claims for conducting so-called preventive monetary easing against downside risks to economic activity and prices," added another member.

One member suggested the strengthening of monetary easing through yield curve control and forward guidance.

Few members, however, insisted to continue with the current monetary policy stance. As Japan has a greater degree of monetary accommodation than the U.S. and Europe, the bank should examine whether further easing is needed, one of the members suggested.

Policymakers remained divided on whether the inflation target will be achieved. While few said inflation is increasing gradually, one of them raised concerns of "the inflation rate becoming negative" on the back of deteriorating economic and financial conditions.

The BOJ kept its monetary policy unchanged and cut its GDP growth and inflation forecasts for fiscal 2019 in its July meeting, as its economy witnessed a 2-year low inflation print in June.