MNI: BOJ Kuroda Keeps Recovery View; Have More Easing Tools

     TOKYO (MNI) - Bank of Japan Governor Haruhiko Kuroda warned Thursday of

growing downside risks to both the domestic and global economies, although he

sees no need to change the baseline scenario that Japan's economy is expected to

expand moderately as the global economy remains firm.

     However, he was quick to note the BOJ had the tools to act if needed in the

event of a slowdown.

     Kuroda told reporters, "Downside risk to Japan's economy is increasing and

we continue to keep a close eye on their developments. The BOJ will consider

additional easy policy, if needed. We have (additional) policy tools."

     He pointed out the four tools that the BOJ cited in September 2016;

lowering the short- (current -0.1%) and long-term interest rates (around zero

percent), expanding the asset purchases and accelerating the pace of monetary

base increase.

     Earlier Thursday, the BOJ board decided in a 7-to-2 vote to stand pat on

monetary policy, leaving yield curve control and asset purchases unchanged, as

Japan's economy is expanding moderately, despite the downside risks.

     The BOJ vowed to maintain its current easy policy "for an extended period

of time," taking into account uncertainties regarding economic activity and

prices, including the effects of the consumption tax hike planned for October

2019.

     The board maintained its economic assessment, despite growing uncertainties

over global demand caused by the U.S.-China trade dispute.

     "Japan's economy is expanding moderately, with a virtuous cycle from income

to spending operating, it said, adding that the economy "is likely to continue

to be a moderate expansion."

     "Overseas economies have continued to grow firmly on the whole," the BOJ

repeated the view.

     Other key points from Kuroda's press conference:

     --Kuroda said that inflation expectations haven't accelerated, but it will

likely move toward the 2% target.

     --Kuroda also repeated his view that it's premature to discuss an exit

strategy from the BOJ's easy policy. "I don't see the need to change the current

easy policy in order to mitigate the side-effects of the easy policy."

     --When asked about the recent rapid declines in Japanese government bond

yields, Kuroda said, "We in July allowed the 10-year bond yield to move widely.

The drop in JGB yields is caused by the drop in overseas bond yields. I think

the drop in JGB bond yields isn't strange."

     --Even if the 10-year bond yield fell to negative territory, the drop

itself will not be problem. It is desirable for bond yields to move flexibly,

reflecting developments of economic and price conditions. The BOJ will conduct a

fixed-rate bond buying operation to curb any undesirable drop in bond yields.

     --Volatile stock market moves amid growing uncertainties over trade

friction continue, but the outlook for corporate profits is good. Foreign

exchange markets are relatively stable. "Stable forex moves are reflecting that

market players see no big change of the global economy."

     --The impact of the trade friction on Japan's economy is limited, Kuroda

said, however, warning, "If the trade friction was prolonged, it will affect

domestic and overseas economies."

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

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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