TOKYO Aug 13 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
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
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)