MNI POLICY: BOJ Keeps Policy Unchanged; Keeps Forward Guidance

--BOJ Will Not hesitate To Take Additional Easing Measures

     TOKYO (MNI) - The Bank of Japan left monetary policy unchanged Tuesday as

there is little sign Japan's economy has deviated from the baseline recovery

scenario, although broad downside risks to economic activity and prices remain.

     The board decided voted 7-2 to stand pat on the yield curve control and

asset purchases, leaving the recovery scenario unchanged as domestic demand

remains solid, supporting the recovery.

     The decision was widely expected by financial markets.

     The BOJ also left the forward guidance for rates unchanged, indicating that

policymakers remain vigilant against the risk their could be a loss of momentum

toward achieving the 2% price target.

     "As for the policy rates, the BOJ expects short- and long-term interest

rates to remain at their present or lower levels as long as it is necessary to

pay close attention to the possibility that the momentum toward achieving the

price stability target will be lost," the BOJ said.

     Other key points from the BOJ board decision after the latest two-day

meeting:

     -- "The bank will not hesitate to take additional easing measures if there

is a greater possibility that the momentum toward achieving the price stability

target will be lost," the BOJ repeated.

     --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 rate to "move upward and downward to

some extend mainly depending on developments in economic activity and prices."

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

around Y80 trillion, although the pace has declined, as the accumulated effects

of keeping rates lower through asset purchases have intensified. The bank noted

it will conduct purchases "in a flexible manner."

     --The BOJ also left the scale of its purchases of ETFs (exchange-traded

funds) and J-REITs (Japan real estate investment trusts) unchanged at about Y6

trillion and about Y90 billion, respectively.

     --On the policy decision, Yutaka Harada, a former government economist,

dissented, believing the long-term yield policy was too ambiguous as a guideline

for market operations.

     Goushi Kataoka, a former private-sector economist, dissented, believing

that it was desirable to strengthen monetary easing by lowering the short-term

policy interest rate.

--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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