BOJ minutes: Prices to rise on output gap, inflation expectations

TOKYO Tue Aug 12, 2014 9:57pm EDT

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TOKYO Aug 13 (Reuters) - Bank of Japan policymakers said that upward pressure on prices will increase as the output gap improves and as inflation expectations rise, minutes of the central bank's July meeting showed on Wednesday.

The output gap - or the difference between actual and potential gross domestic product - turned positive in January-March for the first time in about six years, showing that demand is exceeding supply, which helps push up prices.

Members agreed that even though monthly moves in consumer prices attract widespread attention, the central bank needs to focus on the underlying inflation trends, minutes of the July 14-15 meeting said.

Members noted that a recovery in exports had been delayed, but exports are likely to expand moderately as overseas economies gather momentum.

A few members expressed concern that a shift in production overseas could slow export growth in the future, according to the minutes.

At the July meeting the BOJ kept policy steady and slightly trimmed its economic growth forecast for the current fiscal year, reflecting soft exports and a bigger-than-expected slump in household spending after the April sales tax hike.

In a quarterly review of its long-term projections, the central bank maintained its forecast that consumer inflation would gradually accelerate towards its 2 percent target next year.

The BOJ kept policy on hold at a subsequent meeting in August and downgraded its outlook on exports. (Reporting by Stanley White; Editing by Eric Meijer)

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