MNI POLICY: BOJ Keeps Policy Unch; Cuts Exports, Oseas Outlook

     TOKYO (MNI) - The Bank of Japan left monetary policy unchanged Friday,

voting 7-2 vote to continue with yield curve control and the asset purchases, as

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

     The BOJ board maintained the overall economic assessment, saying "Japan's

economy is expanding moderately, with a virtuous cycle from income to spending

operating," adding that the economy "is likely to continue its moderate

expansion."

     However, in the wake of weaker data, the BOJ lowered its assessment of

exports and overseas economies, reflecting slowing in China and Europe.

     "Exports have shown some weakness recently," the BOJ said. The previous

view was "exports have been on an increasing trend."

     It also said, "Overseas economies have been growing moderately on the

whole, although slowdowns have been observed."

     The previous view was "Overseas economies have continued to grow firmly on

the whole." As for the outlook, the BOJ said Friday, "Although exports are

projected to show some weakness for the time being, they are expected to be on a

moderate increasing trend on the back of overseas economies growing moderately

on the whole."

     "Industrial production has been on a moderate increasing trend," the BOJ

said. The previous view was "industrial production has been on an increasing

trend."

     Looking ahead, the BOJ board is focused on capital investment plans for

fiscal 2019, to be available in the BOJ March Tankan business sentiment survey

due out on April 1.

     Policymakers will carefully examine how they can maintain the baseline

recovery scenario at the April 24-25 meeting when they releases their

medium-term economic growth and inflation rate outlook.

     The key points from the BOJ board decision, which came after the latest

two-day policy meeting that ended Friday:

     --Under the yield curve control framework adopted in September 2016, the

BOJ will keep the target for the overnight interest rate at -0.1%.

     -- The BOJ will continue buying JGBs to stabilize the 10-year yield "around

zero percent" but it will also allow the long-term interest rate to "move upward

and downward to some extend" in line with the changes in economic growth and

inflation.

     In July, 2018, the bank "strengthened" the framework, allowing a wider

trading range of +0.2% to -0.2% for the 10-year Japanese government bond yield,

double the previous, unofficial range of +0.1% to -0.1%.

     -- The BOJ continues to see risks to the outlook from the U.S. economic

policies' impact on global financial markets, the consequences of protectionist

moves, developments in emerging and commodity-exporting economies, negotiations

on UK's exit from the European Union and geopolitical risks.

     --KATAOKA, HARADA DISSENT

     --Reflationist board members Yutaka Harada, a former government economist,

and Goushi Kataoka, a former private-sector economist, dissented again.

     Harada called the guideline for market operations "too ambiguous" while

Kataoka continued to call for additional easing. He said, "It was desirable to

strengthen monetary easing" amid heightened uncertainties regarding development

in economic activity and prices going forward.

     On forward guidance, Harada also dissented, arguing that it would be better

to adopt one that would "further clarify its relationship" with the inflation

target. Kataoka was also opposed. He repeated that it would be better to promise

additional easing in the event of a downward revision to the board's longer-term

inflation outlook.

     --FOR EXTENDED PERIOD

     -- On the conduct of monetary policy, the BOJ maintained the view the bank

"intends to maintain the current extremely low levels of short- and long-term

interest rates for an extended period of time, taking into account uncertainties

regarding economic activity and prices including the effects of the consumption

tax hike scheduled to take place in October 2019."

     -- Officially, the BOJ will maintain the annual pace of its JGB purchases

at around Y80 trillion, although the pace has declined sharply as the

accumulated effects of keeping rates down with asset purchases have intensified.

The bank noted it will conduct the purchases "in a flexible manner."

     -- The scale of asset purchases, such as exchange-traded funds (ETFs),

Japan real estate investment trusts (J-REIT), commercial paper and corporate

bonds was unchanged at Y6 trillion, Y90 billion, Y2.2 trillion and Y3.2

trillion, respectively.

--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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