BOJ Kuroda: Japan Economic Conditions Fine Despite Stock Fall

--BOJ Kuroda: To Watch Stock Prices Carefully

     TOKYO (MNI) - Economic conditions in Japan and other major countries are

fine despite the recent global stock market sell-off, Bank of Japan Governor

Haruhiko Kuroda said Tuesday.

     Kuroda also told the Lower House Budget Committee that the bank will

"carefully watch the developments in stock prices and their impact."

     He declined comment on specific stock market moves but said daily share

prices fluctuate on various factors, and that investors believe the sell-off in

the Tokyo stock market was caused by the sharp drop in U.S. share prices

overnight.

     "Economic fundamentals in Japan, the U.S. and Europe are fine. Corporate

profits have been improving and are expected to rise further," he said.

     The Nikkei 225 stock index ended Tuesday's session at 21,610.24, down

1,071.84, or 4.73%, from the previous day's close, after losing more than 6% at

one point. It followed a plunge in the Dow Jones Industrial Average, which ended

at 24,345.75, down 1,175.21, or 4.6%, on Monday.

     Kuroda repeated his recent remarks that the BOJ will "persistently"

maintain its large-scale monetary easing program because the bank is still

halfway toward achieving its 2% inflation target.

     Asked if the BOJ should reduce the degree of large-scale monetary easing,

he said, "It is not appropriate for the BOJ to raise the 10-year yield target."

     Under the yield curve control framework, the BOJ is seeking to stabilize

the 10-year government bond yield, the benchmark for long-term borrowing costs,

at around zero percent and keep the overnight interest rate at -0.1%.

     Asked whether the BOJ is distorting the stock market by holding too many

ETFs (exchange-traded funds), Kuroda replied that the central bank's ETF

purchase program is part of the monetary easing framework for achieving the 2%

inflation target. It is aimed at lowering risk premiums and supporting the

economy, he said.

     The BOJ is currently buying about Y6 trillion of ETFs annually. Private

economists have said that the BOJ's ETF purchases have been distorting stock

prices and that the BOJ should consider lowering the scale of its ETF buying.

     "There are no big problems about our ETF purchases, with regard to stock

market functions and corporate governance, although I'm aware of concerns about

the impact of the BOJ's ETF purchases on the stock markets," he said.

     The BOJ has been buying ETFs since late 2010, more than two years before

its aggressive easing program began. The outstanding balance of ETFs bought by

the BOJ topped Y16 trillion at the end of November 2017.

     These purchases have made the BOJ a large shareholder of some major firms

listed on the Tokyo Stock Exchange.

     Kuroda noted that the bank's ETF purchases are focused on the TOPIX and

other stock indexes, instead of individual stocks.

     The BOJ is believed to hold 70% of the Japanese ETFs but Kuroda said the

balance of ETFs held by the BOJ accounted for only 3% of the total volume of

securities listed on the Tokyo Stock Exchange.

     In July 2016, the BOJ increased the scale of its purchase of ETFs to Y6.0

trillion from Y3.3 trillion not only to stabilize financial markets but also to

lower risk premiums that were pushed up by Britain's decision to leave the

European Union.

--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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