MNI POLICY: BOJ Kuroda: Central Bank Must Watch Credit Costs

     TOKYO (MNI) - The Bank of Japan must keep a close eye on the risk that a

prolonged virus slowdown will further weaken the real economy and boost credit

costs, Governor Haruhiko Kuroda said Tuesday.

     "The nation's financial system remains stable and banks have sufficient

capital bases. But if the coronavirus outbreak is prolonged at home and abroad,

the real economy would deteriorate, which in turn will increase credit costs (at

banks)," Kuroda earlier told lawmakers.

     "The risk isn't large now but (the BOJ) continues to pay attention," he

added.

     Higher credit costs would squeeze banks' profits, further pressuring ailing

banks. Japan's authorities must prevent systemic risk from failing banks, he

said.

     The BOJ on Monday decided to boost its easy policy not only to further

facilitate corporate financing but also to maintain the stability in financial

markets.

     With regard to purchases of Japanese government bonds, the BOJ removed "at

an annual pace of about JPY80 trillion" and vowed to buy JGBs without a limit

and stands ready to buy the needed amount to maintain the yield curve at around

the target.

--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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