MNI POLICY: BOJ Kuroda: Mkt Stabilizing, Not Fiscal Financing

     Bank of Japan Governor Haruhiko Kuroda said Monday that the BOJ's decision

to increase the scale of purchases of Japanese government bonds isn't monetary

financing and is aimed at maintaining stability in financial markets.

     "Liquidity in bond markets has fallen and the government increases bond

issuance. The BOJ removed 'around JPY80 trillion pace' in order to show the

stance that the BOJ stands ready to buy JGBs above JPY80 trillion," Kuroda told

reporters.

     Concerted action between the BOJ and the government is necessary under the

current situation and they, like other nations, will produce a good policy mix.

     The BOJ conducts monetary policy independently, but in contact with the

government to achieve economic growth and stability in financial markets, he

said.

     Earlier in the day, the BOJ board decided to boost its easy policy to

further facilitate corporate financing as the coronavirus outbreak worsens,

whilst ordering bank staff to consider a new measure to inject liquidity into

financial institutions.

     --DISCIPLINE

     When asked about a worsening of fiscal discipline cased by the BOJ's

decision to buying more JGBs, Kuroda said, "Keeping fiscal discipline is a role

of the government and the Diet, not the BOJ."

     Kuroda pointed out that financing for big and small firms has tightened

significantly and the BOJ must facilitate corporate financing via monetary

policy.

     Kuroda said that the BOJ will buy government bonds as needed without limit

to stabilize interest rates at low levels under the yield curve control policy.

     The governor said that the drop of the 10-year bond yields into negative

territory will not warrant swift BOJ action. Kuroda said increased bond buying

will not last forever, but will extend past the immediate fading of the virus.

     The governor said momentum toward hitting the 2% price target is lost as

the downturn continues. "The coronavirus has serious impact on Japan's economy"

and "The 2% price target will not be achieved in forecast period," Kuroda said,

although he ruled out a revival of deflation.

     However, Kuroda warned that the BOJ pay attention to future moves as short-

and long-term inflation expectations have somewhat fallen.

     Kuroda also said that the BOJ will not hesitate to take additional easy

measures if needed, citing deepening negative interest rates as a possible

option, although he didn't elaborate.

--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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