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MNI 5 THINGS: BOJ Masai: Keep Easing Policy, Watch Costs

--Board Member Also Calls for Close Watch on Sales Tax Hike Impact
     MATSUMOTO, Japan (MNI) - Bank of Japan board member Takako Masai said
Thursday that it is appropriate to maintain large-scale monetary easing because
it takes time to achieve the 2% inflation target.
     But in her speech to business leaders in Matsumoto City, central Japan, she
also warned against the costs of prolonged easing, saying the BOJ must carefully
watch the developments in economic, price and financial conditions.
     Masai also cautioned that the sales tax hike scheduled in October 2019
could have a "significant" impact on pensioners, although the BOJ has estimated
that the drag from the tax hike should be smaller than the impact of the
previous hikes, in 2014 and 1997.
     At its latest policy meeting on June 14-15, the BOJ board decided in an
8-to-1 vote to maintain its cautiously stimulative monetary easing stance under
the yield curve control framework.
     The key points from Masai's speech:
     -- Since the release of the bank's quarterly Outlook Report in April, data
have shown consumer price gains have been slightly weaker than expected but the
momentum toward achieving the 2% price stability target is "maintained."
     -- The BOJ's aggressive monetary easing has produced intended effects but
consumer prices still lack upward momentum, compared with a steady improvement
in the economy. Therefore, the BOJ must "continue with strong monetary easing in
a persistent and sustainable manner, while being more careful than ever when
examining developments in economic activity and prices as well as financial
     -- As for the conduct of monetary policy, the BOJ "needs to take the impact
on the intermediation in the financial markets and functioning in markets into
consideration" and it also needs to pay attention to the fact that "the bold
easy policy is lowering banks' profits from lending."
     -- Japan needs to "fully overcome" years of deflation by achieving the 2%
inflation target, a global standard. Achieving stable 2% inflation in Japan and
other economies "will bring stability of exchange rates in the long run, and
ultimately the stability of financial markets and corporate activities."
     -- The BOJ estimated in April that the net burden on households around the
time of the sales tax hike from 8% to 10% planned in October 2019 would be
"smaller than that of the two previous hikes (in 2014 and 1997). But there is
"inevitably considerable uncertainty" because the impact on the sentiment of
households may differ significantly according to their financial conditions.
     The sentiment of households whose main source of income is wages is
expected to remain reasonably firm while households whose main source of income
is pensions are expected to be "significantly affected" by the higher costs for
daily necessities, although there are plans to implement measures to mitigate
the burden.
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email:
--MNI Tokyo Bureau; tel: +81 90-4670-5309; email:
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