MNI POLICY: BOJ Kuroda Sees H2 Recovery; But High Uncertainty

     TOKYO (MNI) - Japan's economy is likely to improve in the second half of

the year but uncertainties remain and the the Bank of Japan will ease further

without hesitation if necessary, Governor Haruhiko Kuroda said Friday.

     "There are significant uncertainties over the outlook for the economy,"

Kuroda said at the Virtual Event Co-Hosted by Harvard Law School (HLS) and the

Program on International Financial Systems (PIFS).

     Warning the impact of the Covid-19 pandemic will weigh heavily on the

economy for the time being, Kuroda said the BOJ would do "whatever it takes as a

central bank if necessary".

     However, he saw no need to further lower the policy interest rates at

present, emphasising the BOJ's role providing funds through the financial system

to firms and households.

     --PRICE TARGET INTACT

     He noted it will take time to achieve the 2% price target but the BOJ

wasn't abandoning this as an ultimate goal.

     Kuroda also warned on the risk that second-wave effects from Covid-19 could

push the economy considerably lower, with two main points to focus on

     "The first is to ensure corporate financing. To this end, it is essential

to maintain financial system stability and accommodative financial conditions,

thereby avoiding further downward pressure on the real economy from the

financial side," Kuroda said.

     "The second point is whether firms' and households' growth expectations

will decline and lead to cautious attitudes toward spending," he added, pointing

to the aftereffects of the 1990's asset-bubble bust on Japanese corporate and

consumer attitudes.

     --BOJ LENDS, GOVT SPENDS

     Kuroda pointed to the substantial measures the BOJ has introduced to boost

corporate financing and strengthen the financial market stability.

     "Once the impact of the Covid-19 subsides and the economy starts recovering

to normal growth path, extraordinary measures will reduce, but the BOJ's

expanded balance sheet will not normalize until the 2% price target is

achieved," Kuroda said.

     He also underlined how any recovery must be a joint effort between the

central bank and government, mixing fiscal and monetary policies; the government

has spending power and the BOJ has lending power, he said, noting the clear

split of roles.

--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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