MNI 5 THINGS: BOJ Opinions: Act Flexibly on Side-Effects

     TOKYO (MNI) - The summary of opinions expressed at the Bank of Japan's

April 26-27 policy meeting released Thursday showed that one board member said

the BOJ would "flexibly" respond to the side-effects of prolonged large-scale

monetary easing and that it must explain such an action would be different from

exiting from the easing program.

     At the meeting, the BOJ board decided in an 8-to-1 vote to maintain its

monetary easing stance under the yield curve control framework it adopted in

September 2016. No change in monetary policy was widely expected. The BOJ

believes large monetary stimulus is still needed to guide low inflation around

1% toward its 2% price stability target.

     The board also decided to stop publishing its estimate on when it can

achieve the 2% inflation target in order to "dispel the misunderstanding" among

some market participants that a delayed timing would prompt the bank to conduct

additional easing, BOJ Governor Haruhiko Kuroda told reporters after the

meeting.

     The key points from the summary of opinions:

     -- "The BOJ persistently continues with the current monetary easing" and

"It is necessary to make efforts to give a clear explanation on the meaning of

exit and normalization, and gain understanding among the public that the BOJ can

respond flexibly depending on developments in economic activity and prices as

well as financial conditions," one board member said.

     This means that the BOJ must stand ready to adjust the aggressive easing to

minimize its growing side-effects and the that it must communicate closely with

the public and markets to prevent market participants from interpreting such a

move as an exit from the easing program that was launched in 2013.

     -- "It is necessary to clearly communicate that the BOJ's commitment to

achieving the price stability target of 2% at the earliest possible time has not

changed at all, even when the description on the projected timing of reaching

around 2% inflation has been reviewed."

     -- "In order to continue with powerful monetary easing, the BOJ needs to

constantly consider enhancing its sustainability while aiming to gain consensus

among the public on the necessity of the price stability target."

     -- "It seems to take some time to reach 2%" as the inflation expectation

formation is adaptive.

     -- "Although the tightening supply-demand conditions in capital stock and

the labor market have led to firms' positive stances to some extent, their

stances shifting toward raising prices are not strong enough to push up

inflation to 2%."

     -- "The purchases of risky assets including exchange-traded funds (ETFs)

are carried out as part of the policy package aiming at achieving the price

stability target, and their policy effects and the possible side effects should

continue to be examined from every angle."

--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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