MNI POLICY: BOJ Kuroda: Impact Of Trade Dispute Ltd, Concerns

--No Plans For Expanded 10-Yr Tolerance Range

     TOKYO (MNI) - Bank of Japan Governor Haruhiko Kuroda voiced concern

Wednesday over the impact of a prolonged trade dispute on global financial

markets and economy, although he noted the current impact was limited.

     "If the trade dispute was prolonged, it will worsen sentiment and

destabilize global financial markets," Kuroda told reporters.

     Kuroda also said he doesn't have plans to change the 10-year target rate

from around zero percent in order to mitigate the side-effects of the BOJ's easy

policy.

     He also said that he does "not plan to expand an allowance range of the

10-year rate" from a range of -0.2% to +0.2%. The BOJ maintains the easy policy

to achieve the 2% price target."

     Earlier in the day, the BOJ board decided in a 7-to-2 vote to stand pat on

monetary policy, leaving yield curve control and asset purchases unchanged, as

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

     The BOJ vowed to maintain its current easy policy "for an extended period

of time," taking into account uncertainties regarding economic activity and

prices, including the effects of the consumption tax hike planned for October

2019.

     In its Outlook Report, the BOJ board revised down its medium-term inflation

projection for the current fiscal year to 0.9% from the 1.1% outlined in July.

     The BOJ also lowered their median inflation rate in fiscal 2019 to 1.4%

from the 1.5% seen in July and the median inflation rate in fiscal 2020 was also

lowered to 1.5% from 1.6% previously.

     Other key points from Kuroda's presser:

     --"Downside risks to the economy are larger than before, as we reported in

the Outlook Report. If the downside risks materialized, we would take policy

action," Kuroda said.

     --He said that lowering interest rates, and expanding monetary base and

asset purchases would be possible options, but didn't elaborate.

     --As for Japan's inflation rate, Kuroda said, "Japan's consumer prices have

been relatively weak, compared with the economic expansion and the labour market

tightening."

     --He also said that Japan's medium- to long-term inflation expectations

remain weak but it will move toward the 2% price target, although he didn't

indicate when it would happen.

     --When asked about the recent volatile global stock markets, Kuroda said,

"The rise in U.S. interest rate has lowered U.S. stock prices, which also

affected global stock prices." But he added that the global stock markets have

been affected by the U.S.-China trade dispute. He noted that U.S. economic

fundamentals remain solid and the outlook for corporate profits is good,

indicating that he didn't think stock prices would continue falling.

     --"(Volatile) global stock markets haven't destabilized other markets.

Foreign exchange markets are moving stably" compared with volatile stocks,

Kuroda said.

     --Kuroda added that he doesn't expect the functioning in Japanese

government bond markets to further worsen from here, as the BOJ in July has

taken necessary action to increase the functionality.

     --In July, the BOJ board decided to allow the 10-year bond yield to move in

a range of -0.2% to +0.2%, doubling about the previous unofficial range of -0.1%

to +0.1%.

     --The governor repeated that the BOJ continues to carefully watch the

side-effects of easy policy, including developments of the functioning in JGBs.

--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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