MNI BOJ Kuroda: Keep Easy Policy for 2% Target & Watch Costs

     TOKYO (MNI) - Bank of Japan Governor Haruhiko Kuroda said Wednesday that

the BOJ will persistently maintain the current easy policy, while keeping a

close eye on both its positive and side effects.

     "This is exactly the kind of situation in which policy sustainability and

durability are important," Kuroda said at the meeting of Councilors of Japan

Keidanren.

     Other key points from Kuroda's speech:

     --"It is necessary to maintain a positive output gap - a driver for

inflation - for as long as possible under the current framework of QQE with

yield curve under control and thereby firmly sustain the momentum toward 2%

inflation."

     --"It is likely to take more time than expected to achieve the price

stability target while uncertainties regarding the outlook have heightened

further. However, firmly maintaining the momentum toward achieving 2% inflation

through such policy conduct will ultimately help to ensure that the price

stability target is achieved at the earliest possible time without putting an

excessive burden on the real economy and the functioning of financial

intermediation."

     --"The economy is already not in deflation in the sense of a sustained

decline in prices. However, prices have continued to show relatively weak

developments compared to the economic expansion and the tightening of the labor

market."

     --It is still taking time to achieve the 2% price stability target.

"Downside risks mainly regarding overseas economies have come to warrant further

attention."

     --"The BOJ needs to pursue the monetary policy that is most appropriate to

the situation at the time while weighing its benefits and costs."

     --"The BOJ is aware that prolonged downward pressure on financial

institutions' profits, with the low interest rate environment and severe

competition among financial institutions continuing, could create risks of a

gradual pullback in financial intermediation and of destabilizing the financial

system." 

     --These risks are judged as not significant at this point as financial

institutions have sufficient capital bases. But the BOJ continues to carefully

watch future development.

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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