BOJ Kuroda: Improved Output Gap, Price Outlook To Back 2% CPI

     TOKYO (MNI) - Bank of Japan Governor Haruhiko Kuroda Tuesday repeated his

optimistic outlook that continued modest economic growth and a shift in public

expectations toward higher prices should lead inflation to the bank's 2% target.

     "The year-on-year rate of change in the CPI (all items less fresh food) is

likely to continue on an uptrend and increase toward 2%, due mainly to an

improvement in the output gap and a rise in medium- to long-term inflation

expectations," Kuroda told a quarterly meeting of the BOJ branch managers.

     He didn't say when the BOJ could anchor inflation around 2%.

     Kuroda also repeated the BOJ's latest assessment that Japan's economy is

expanding moderately, with a virtuous cycle from income to spending operating

intact.

     As for the near-term outlook, Kuroda said, "Japan's economy is likely to

continue its moderate expansion."

     On the conduct of monetary policy, Kuroda repeated that the BOJ will

continue expanding the monetary base until the year-on-year rise in the core CPI

exceeds 2% and stays above the target in a stable manner.

     "The BOJ will make necessary policy adjustments, taking account of

developments in economic activity and prices as well as financial conditions,

with a view to maintaining the momentum toward achieving the price stability

target," he said.

     At its next policy meeting on Oct. 30-31, the BOJ board will update its

medium-term growth and inflation projections and risk analysis in the quarterly

Outlook Report.

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com

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