MNI: BOJ Suzuki: Must Watch Costs of Prolonged Monetary Easing

     WAKAYAMA, Japan (MNI) - Bank of Japan board member Hitoshi Suzuki said

Thursday that the BOJ must carefully watch the adverse effects of continued

large-scale monetary stimulus on the economy and financial markets.

     "We need to continue closely watching the effects that the recent

large-scale monetary easing is having on the economy, prices and financial

conditions," Suzuki said in a speech to business leaders in Wakayama City,

western Japan.

     While interest rates have been maintained at super-low levels under the

BOJ's yield curve control policy framework adopted in September 2016, "markets

are living creatures" that can hurt the real economy as seen in the past

financial crises, he said.

     The outstanding bank lending balance has been rising amid low borrowing

costs but stiff competition among lenders and low returns on portfolio

investments have squeezed profits in the financial industry, Suzuki noted.

     "At this point, the stability in the financial system is believed to be

maintained, but we need to carefully monitor the cumulative impact of the

sustained large-scale monetary easing on the financial system and the

intermediation of financial firms," he said.

     But Suzuki didn't say the BOJ needed to consider scaling back the

aggressive easing program launched in April 2013 that has helped push up

inflation only slowly.

     Repeating the official line that the BOJ is still halfway toward achieving

its 2% inflation target, he said, "It is important to continue powerful monetary

easing persistently."

     Suzuki was an executive at the Bank of Tokyo-Mitsubishi UFJ before joining

the BOJ's nine-member board in July 2017.

     At its latest policy meeting on Jan. 22-23, the BOJ board decided in an

8-to-1 vote to maintain its current monetary easing stance under the yield curve

control framework.

     Under the yield curve control framework, the BOJ is seeking 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%.

--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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