MNI POLICY: BOJ Amamiya: Won't Reduce Degree of Easy Policy

     KYOTO, Japan (MNI) - Bank of Japan Deputy Governor Masayoshi Amamiya said

Thursday that the BOJ will not weaken the degree of monetary easing, and that

the BOJ will continue seeking a good balance between economic expansion and

price stability.

     In a speech to business leaders in Kyoto, western Japan, Amamiya said, "The

BOJ judged it necessary to allow the long-term yields to move upward and

downward to some extent mainly depending on developments in economic activity

and prices, thereby maintaining the market functioning so as not to create more

concern."

     "In case of a rapid increase in the yields, the BOJ will purchase Japanese

government bonds promptly and appropriately."

     He was referring to the BOJ board's decision Tuesday in a 7-to-2 vote to

make its long-term interest rate target and asset purchases more "flexible,"

allowing the nearly flat JGB yield to steepen slightly in line with firmer

growth and inflation.

     The BOJ hopes to recover some functions of the tepid JGB market while

keeping the stimulative effects of large-scale monetary easing.

     --NOT RATE HIKE

     The bank will allow a wider range of +0.2% to -0.2% for the 10-year JGB

yield, double the current unofficial range of +0.1% to -0.1%, but Amamiya said,

"The BOJ doesn't expect the level of yields ratcheting up."

     He also said the BOJ must pay attention to the costs of easy policy in

order to achieve an economic expansion and price stability "in a balanced

manner."

     However, he added, "There is no change in the BOJ's intention that it will

thoroughly examine the risk considered most relevant to the conduct of monetary

policy."

     --BALANCED GROWTH, INFLATION

     "The BOJ will continue conducting monetary policy in an appropriate manner,

taking account of developments in economic activity and prices as well financial

conditions," Amamiya said.

     The career central banker also said the latest policy decision is aimed at

"strengthening the sustainability of the current powerful monetary easing,

taking into account the side effects," repeating the board's statement issued

Tuesday.

     "The BOJ recognizes that the effects of monetary easing will be

strengthened as a whole, in consideration of this sustainability," Amamiya said.

     Looking ahead, he predicted that the factors restricting price gains will

fade gradually.

     Consumer price gains have been slow due to several factors -- many

businesses and households do not expect prices to keep rising steadily after

experiencing years of stubborn deflation, firms are cautious about raising

prices for fear of losing market share and some sectors are investing in

automation to cope with labor shortages.

     --2% FOR ROREX

     Amamiya also stressed that the bank will stick to its increasingly evasive

2% price stability target set in 2013.

     "Aiming at the global standard of 2% inflation is very important in

achieving stability in business management and in the economy as a whole through

stable foreign exchange rates," he said.

--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

[TOPICS: MAJDS$,MMJBJ$,M$A$$$,M$J$$$,MT$$$$]