MNI POLICY: BOJ Kuroda: Must Eye Impact of Unconventional Pol

     TOKYO (MNI) - Bank of Japan Governor Haruhiko Kuroda said Thursday that the

central bank has tools to stimulate the economy, even when the bank faces the

zero lower bound, but needs to carefully watch both the favorable and

unfavorable effects.

     Kuroda said, "In a low interest rate environment, there is a greater risk

that central banks will face the zero lower bound problem, as the starting point

of monetary easing is to lower market interest rates below the neutral level of

interest rates." He was speaking at the G20 symposium cosponsored by the BOJ and

the Ministry of Finance.

     Other key points from Kuroda's speech:

     --"We have invented various unconventional monetary policy measures to

tackle (the zero lower bound), such as negative interest rate policies, lowering

of longer term interest rates and depressing risk premia by purchasing various

assets based on experiences of past financial crises."

     --"We now know we have the tools to stimulate the economy even when we face

the zero lower bound problem."

     --"However, we need to carefully monitor and evaluate the effects of these

unconventional measures on economic developments, prices and financial

conditions since the transmission mechanisms, benefits, and side-effects of

these measures could be different from those of conventional monetary policy

measures based on controlling short-term interest rates."

     --"The natural rate, which is consistent with potential growth rates, will

decline if long-term growth rates decline together with a declining and aging

population."

     --"There will be downward pressure on real interest rates as the natural

rate declines."

     --"As a result, nominal interest rates consistent with their economic

potential decrease, given that the inflation rates are constant."

     --"An aging and declining population doesn't necessarily push down

macroeconomic and per capital growth rates." "Even though demographic changes

have a negative impact on economic growth, economic growth could be stimulated

by promoting capital accumulation and innovation."

     --It is the most pressing agenda "how do we maintain a social security

system with an aging population and fewer children." "We continuously assess the

most appropriate public social security system, taking into account of

significant changes to demographic structures."

--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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