BOJ Kuroda: Need Above 2% CPI To Achieve Price Target

--Kuroda Stresses Again BOJ To Maintain Easing Until Target Achieved 

     NAGOYA, Japan (MNI) - Bank of Japan Governor Haruhiko Kuroda said Monday

the central bank will maintain its monetary easing stance until it has created

an environment in which people will believe that prices will rise about 2% every

year.

     At the same time, Kuroda warned that the BOJ must watch the side-effects of

large monetary stimulus on financial institutions' profits. At the moment, this

risk is  "not significant," he added. 

     "There is still a long way to go before achieving the price stability

target of 2%," Kuroda repeated in a speech to business leaders in Nagoya City,

central Japan.  

     "Going forward, however, firms' stances are likely to gradually shift

toward raising wages and prices with the further improvement in the output gap,"

he said. "People's medium- to long-term inflation expectations are projected to

rise steadily as further price rises come to be widely observed."

     With the persistence of these positive developments, inflation will

steadily proceed toward the central bank's price stability target of 2%, he

added.

     "It is crucial that people actually experience inflation above 2% so that

the perception takes hold that prices of goods and services will tend to go up

every year by around 2%," Kuroda said, reminding of the BOJ's continued

commitment to allow CPI to overshoot the 2% target, if necessary, to ensure that

the general perception of stable inflation at that rate is well established.

     At its latest policy meeting on Oct. 30-31, the BOJ board decided in an

8-to-1 vote to maintain its current monetary easing stance under the yield curve

control framework it adopted in September last year.

     In addition, recent weak price data prompted the board to lower its

projections for consumer prices in fiscal 2017 and 2018, but the BOJ stuck to

its latest timeframe that it can achieve its 2% inflation target "around fiscal

2019" ending in March 2020.

     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%.

--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

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com

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