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MNI (London)
--Ex-BOJ Momma: Global Growth Weakening, China A Concern
--Ex-BOJ Momma: BOJ Policy "Game Over,"; CPI
--Ex-BOJ Offl: BOJ Has No Effective Tool To Curb Stronger Yen
--Ex-BOJ Offl: Japan Core-Core CPI Unlikely To Rise To 1% 
By Hiroshi Inoue
     TOKYO (MNI) - Japan's economy is slowing, pressured by weaker global
growth, but is unlikely to fall into recession as domestic demand remains solid,
a former Bank of Japan chief economist told MNI in an interview Tuesday.
     "I don't have perfect confidence in my view, but Japan's economy will slow
although it will not fall into recession," Kazuo Momma, now executive economist
at Mizuho Research Institute, said.
     According to Momma, domestic capital investment on the wane, but not at a
pace to trigger recession, as non-manufacturers' investment appetite remains
     Momma expressed concern over the growth outlook for China and the impact of
the slowing global demand on the U.S. economy.
     China is implementing stimulus measures to prevent a worsening slowdown,
but the effectiveness of Beijing's moves remain uncertain, he warned.
     The former official also expressed concern that the slowing global economy
would have a knock-on impact on the yen, especially in the U.S. slows markedly.
     "If the U.S. economy clearly slows, it will increase investors' risk-off
attitude, which in turn will cause a stronger yen," he said.
     "The worst (would be) that the U.S. government blames a slower economy on a
strong dollar," Momma said, saying such comments would drive a market view that
Washington wants to weaken the dollar, further strengthening the yen.
     Despite concerns over a stronger yen, Momma said the BOJ has no effective
tools to curb it.
     "The BOJ has no effective policy tool to fight a yen rise. The only
possible tool is that the BOJ emphasizes its powerful easing or increases the
flexibility of the easy policy under the current policy framework through
communication with markets," Momma said.
     Momma noted that BOJ policy had very obvious pros and cons, but accepted
there was no easy answer to ease the observed downsides, but saying it was "game
over" for further easy policy, indicating a new framework was needed.
     "I can't come up with the policy where the benefits clearly exceed the
costs," he said.
     Last year, Momma told MNI that the BOJ must rethink how to achieve its
target, as they cannot address the accumulated side-effects of easy policy under
their current policy framework.
     Inflation remains a problem for the BOJ and Momma noted a possibility that
the core-core CPI measurement falls to negative territory if the yen sees strong
     "It is unlikely Japan's core-core consumer price index (excluding fresh
food and energy item) will rise to 1% on year. Although the key price index may
temporary rise to 1%, it is unlikely to stabilize at 1%," Momma said.
     Japan's core-core CPI, the measure BOJ officials focus on to gauge the
underlying trend, only rose 0.3% y/y in December.
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email:
--MNI London Bureau; tel: +44 203-586-2225; email:
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