MNI: BOJ Keeps Policy Target, Sees Firmer Overseas Demand

--Board Member Kataoka Dissents for 5th Meeting, Sees Low CPI 

     TOKYO (MNI) - The Bank of Japan board decided Friday 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.

     --SEES MODERATE GROWTH

     The BOJ board maintained its overall economic assessment, saying, "Japan's

economy is expanding moderately, with a virtuous cycle from income to spending

operating."

     It expects the moderate expansion to continue as both exports and

industrial production remain on an uptrend and consumption has been increasing

moderately.

     The board slightly upgraded its view on overseas economies, which "have

continued to grow firmly on the whole." Previously, it said overseas economies

had continued to grow "at a moderate pace on the whole."

     From 1530 to 1615 JST (0630 to 0715 GMT), BOJ Governor Haruhiko Kuroda will

hold a news conference to discuss the board's decision at its two-day policy

meeting that ended just before midday Friday.

     The BOJ is set to keep the shape of the nearly flat bond yield curve (-0.1%

overnight and around 0% in the 10-year zone) for some time to come because the

increase in consumer prices remains slow amid the sustained, moderate economic

recovery.

     --KATAOKA DISSENTS

     As expected, board member Goushi Kataoka dissented for the fifth straight

meeting after taking office in July. He continued to argue that additional

easing would be necessary to achieve the 2% inflation target at an early stage,

but didn't propose any specific policy action.

     In the bank's monetary policy statement, Kataoka was quoted as saying the

BOJ should try to hit the inflation target "in fiscal 2018," and that it was

appropriate for the BOJ to purchase JGBs "so that yields on JGBs with maturities

of 10 years and longer would broadly be lowered further."

     He also sees a low possibility of the year-on-year rate of change in the

core CPI increasing toward 2% "going forward."

     The board left its near-term assessment of inflation conditions unchanged

from the previous meeting on Jan. 22-23, repeating, "Inflation expectations have

been more or less unchanged."

     --WAGE TALKS FOCUSED

     In projecting inflation, the focus is on the response from major firms on

March 14 to labor union demands for wage hikes and better working conditions for

fiscal 2018 starting in April. The results will set the tone for wages paid to

people working for smaller firms.

     Low wage hikes could prompt the board to consider pushing back the

estimated timing of achieving the 2% inflation target again from "around fiscal

2019" at the next key policy meetings in April or July, when the bank releases

its quarterly Outlook Report.

     The report due after the April 26-27 meeting will show the board's new

three-year projections for growth and inflation through fiscal 2020 ending in

March 2021.

     Under the yield curve control framework, the BOJ will seek 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%.

     The BOJ's asset purchases, which are not the main policy target any longer,

will be maintained at the current pace. The outstanding amount of its JGB

holdings will increase about Y80 trillion annually, but the pace has slowed in

light of the recent drop in yields.

     The annual pace of purchases of other assets will also be maintained at Y6

trillion for exchange-traded funds (ETFs), Y90 billion for Japan real estate

investment trusts (J-REIT), Y2.2 trillion for commercial paper and Y3.2 trillion

for corporate bonds.

--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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