MNI POLICY: BOJ Kuroda: Shows Stance To Act Without Hesitation

     TOKYO (MNI) - The Bank of Japan has clearly shown it is willing take

additional easing without hesitation if greater downside risks to global economy

continues, Governor Haruhiko Kuroda said Thursday.

     Kuroda told reporters, "I'm more positive on additional easy policy than at

the previous meeting in July." But he indicated it doesn't mean that the BOJ was

committed to move at the October policy meeting.

     He said that the BOJ will take additional easy policy "without hesitation"

if there is a greater risk that the momentum toward achieving the price

stability target will be lost.

     "I don't think the economy will fall into recession and the momentum to the

price stability target will be lost. But we need to carefully examine the impact

of greater downside risk to global economy on Japan's economy," Kuroda said.

     Kuroda laid out reasons for the BOJ keeping easy policy, saying that a

virtuous cycle continues working in both corporate and household sectors.

     Earlier in the day, the BOJ left monetary policy unchanged but vowed to

re-examine economic and price developments at the next policy meeting in

October.

     Other key points from Kuroda's comments:

     --When asked about policy options, Kuroda repeated the four tools that he

has previously noted, such as lowering the short-term and long-term policy

interest rates, expanding the asset purchases and accelerating the pace of

injecting. Lowering the short-term policy interest rate from -0.1% is one

option.

     --The BOJ must carefully examine both favorable effects and side-effects on

financial institutions and the financial system. The BOJ will decide on

appropriate policy after comprehensively examining benefits and costs of more

easing. But he didn't' elaborate on possible measures to mitigate the

side-effects of more easing on banks and financial system.

     --Compared with the U.S. Federal Reserve, there is little room for the BOJ

to conduct easing. But the BOJ has more room to move against the European

Central Bank, which recently lowered its policy rate to -0.5% from -0.4%.

     --Kuroda said that he doesn't see an imminent need to change the current

policy framework based on the yield curve control policy, including the large

scale of asset purchases.

     --"It's desirable for the yield curve to steepen further" as the drop in

super long-term bond yields will have an adverse impact on pension funds and

life insurance firms that are seeking for return through investment in

longer-end asset.

     --The main scenario based on the prediction made by the International

Monetary Fund remains in place that the global economy will pick up toward 2020

but downside risks are increasing.

     --The consumption tax hike to 10% from 8% on Oct. 1 will not worsen Japan's

economy but the BOJ needs to carefully watch its impact on consumer spending.

--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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