MNI 5 THINGS: BOJ Amamiya: Talking How To Use What Exit Tools

--BOJ Dep Gov Nominee Wakatabe: To Propose More Easing If Needed

     TOKYO (MNI) - Government nominees for the Bank of Japan deputy governors --

Masayoshi Amamiya, executive director in charge of monetary policy at the BOJ,

and Masazumi Wakatabe, an economics professor sympathetic to Prime Minister

Shinzo Abe's reflationary policy mix -- made the following points Monday at

their confirmation hearing held by the Lower House Steering Committee.

     Pending Diet approval, the two will replace Hiroshi Nakaso and Kikuo Iwata,

whose five-year terms end on March 19.

     Amamiya, 62, is a career central banker. He has been responsible for

drafting many of the bank's monetary policy measures, including the policies on

quantitative and quality easing and negative interest rates. Wakatabe, 52, is a

reflationist who has advocated bold monetary easing to overcome deflation. He

teaches economics at Waseda University in Tokyo.

     -- Amamiya said BOJ officials "are discussing what exit options the BOJ has

and how they should be used" in preparation for the eventual unwinding of

large-scale monetary easing. He didn't elaborate further but said how the BOJ

should exit from easing will depend on economic and financial conditions at the

time. Wakatabe said that the BOJ must avoid a premature exit from easing, which

would send Japan back into deflation.

     --Amamiya also said the BOJ is "well equipped with options" to reduce the

degree of easing without upsetting the markets or hurting the economy. The bank

will keep two points in mind: "One is how to shrink the expanded balance sheet

and the other one is how to normalize short-term interest rates."

     --Amamiya repeated the BOJ's mantra that achieving the 2% inflation target,

which the BOJ sees as a global standard, should help stabilize foreign exchange

and other financial markets "in the long run." (BOJ officials have explained

that targeting a lower inflation rate, like 1%, would trigger an unwanted rise

in the yen and run counter to Japan's bid to reflate the economy.)

     -- Both Amamiya and Wakatabe stuck to the official line, saying the

benefits of aggressive easing are bigger than its costs. Amamiya said that the

negative interest rate policy, which was adopted in 2016, is squeezing profits

for lenders but it is not hurting the financial intermediation because banks

have enough capital. But he also said the negative impact of easing is

accumulating and thus that the BOJ will carefully watch the development.

Wakatabe argued the side-effects of the easy policy hasn't materialized.

     --Wakatabe said he would like to assess whether the current easy policy is

enough to achieve the 2% price target and that he would propose to conduct

additional easing if necessary. He also said that there is no limit to

additional easing tools but declined to give details.

--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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