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     SAPPORO, Japan (MNI) - The Bank of Japan must maintain its aggressive
monetary easing policy stance to achieve stable 2% inflation, which would create
room for lowering real borrowing costs when the economy slumps, BOJ board member
Yukitoshi Funo said Wednesday.
     At the same time, Funo urged the government to implement structural reforms
and firms to provide goods and services that match demographic changes while
financial conditions are kept very accommodative.
     In a speech to business leaders in Sapporo City, northern Japan, Funo
repeated the BOJ's latest outlook that the momentum toward 2% inflation is
maintained and consumer prices will show a higher year-on-year rise toward the
inflation target.
     "But the momentum still lacks strength and we are only half way toward
achieving the price stability target," he said.
     Therefore, it is important to "push ahead" with aggressive easing
comprising super-low interest rates and large-scale asset purchases.
     Funo also repeated the BOJ's outlook that Japan s economy is likely to
continue its moderate expansion.
     He stuck to the official line that near-zero inflation is likely to rise to
2% "around fiscal 2019."
     "Looking ahead, compensation of employees is expected to increase
moderately and surpass the pace of nominal GDP growth in the second half of our
projection period through the end of fiscal 2019," Funo said.
     But he added that BOJ officials are watching the risk that companies will
remain cautious about wage hikes.
     Policymakers point out compensation of employees has been rising along with
a modest economic recovery but it is mainly pushed up by a high pace of increase
in lower-paid part-time and contract workers amid labor shortages in some
sectors. The year-on-year growth in average wages remains low.
     At its latest policy meeting on July 19-20, the BOJ board decided to leave
its monetary policy unchanged in a seven-to-two vote, retaining the yield curve
control target it adopted in September last year, while pushing back its
estimate for achieving its 2% inflation target by a year until "around fiscal
     Since joining the nine-member board in July 2015, Funo has been following
the reflationary policy stance of Governor Haruhiko Kuroda.
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email:
--MNI Tokyo Bureau; tel: +81 90-4670-5309; email:
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