MNI POLICY: BOJ Masai: To Act If Needed; Benefits, Costs Eyed

     TOKYO (MNI) - The Bank of Japan must carefully examine the risks

surrounding overseas economies and how they affect Japan, board member Takako

Masai said on Wednesday, noting that the BOJ like other central banks will take

policy action if needed.

     Masai told business leaders in Tsu City "(The BOJ) will conduct appropriate

policy to achieve the price stability target, while examine both the benefits

and costs of (more) easing from the broad angle."

     However, she didn't elaborate on how to deal with the risks and what kinds

of measures the BOJ would consider.

     Masai is widely regarded to be a neutral board member.

     The minutes of the July 29-30 meeting released earlier Weds show the BOJ

backed away from any pre-emptive easing measures, leaving policy unchanged, as

the economy continues to expand moderately, underpinned by solid domestic

demand, although it admitted to greater downside risks to both activity and

prices.

     The BOJ warned, "In particular, in a situation where downside risks to

economic activity and prices, mainly regarding developments in overseas

economies, are significant."

     The bank added, "The bank will not hesitate to take additional easing

measures if there is a greater possibility that the momentum toward achieving

the price stability target will be lost," a message repeated in September

     Other key points from Masai's speech:

     --Masai voiced concern over the risk that the pick-up in overseas demand is

delayed and downside risks to overseas economies heightened further and she is

worried about the risk that volatile financial markets will delay a recovery of

the global economy.

     --Masai is also worried about the risk that growing geopolitical risk will

adversely affect private consumption after the tax hike on Oct 1, although the

impact of the tax hike on spending is expected to be smaller than the previous

hike in 2014.

     --She also said that the rising trend of Japan's core consumer price index

seemed to have paused and added that Japan is still far from achieving the 2%

price target. But she maintained the view that the momentum toward the price

target will increase.

     --She also said that if volatility in global financial markets increased on

the back of the heighted downside risks to the global economy, it will have

adverse impact on prices through foreign exchange rate and international

commodity prices.

     --The virtuous cycle from income and spending continues working and Masai

has an optimistic view against the outlook for exports and industrial

production.

     --Business sentiment among manufacturers has worsened and their appetite to

implement capital investment weakened.

     --Private consumption continue to be solid on the whole based on favorable

income and employment conditions.

     --Masai said that she maintains a cautious view on a pick-up of overseas

economies due to the sustained trade friction, weak IT-related demand and

capital goods, and the Brexit issue, and she is also worried over volatile

global financial markets.

--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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