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Opening calls

     TOKYO (MNI) - Bank of Japan board members agreed that prolonged downward
pressure on financial institutions profits could create the risk of a gradual
pullback in financial intermediation and destabilizing the financial system, but
they shared the view that the BOJ needs to pay attention to developments in
their situation and saw no imminent need of adjusting the easy policy to
mitigate the side-effects of that policy, the minutes of the BOJ's October 30-31
policy meeting released Wednesday showed.
     At the meeting, the BOJ board decided in a 7-to-2 vote to stand pat on
monetary policy, leaving yield curve control of the asset purchases unchanged,
as Japan's economy is expanding moderately despite the downside risks.
     The BOJ vowed to maintain its current easy policy "for an extended period
of time," taking into account uncertainties regarding economic activity and
prices, including the effects of the consumption tax hike planned for October
     The BOJ board revised down its medium-term inflation projection for the
current fiscal year to 0.9% from the 1.1% outlined in July, the BOJ quarterly
Outlook Report released Wednesday showed.
     The BOJ also lowered their median inflation rate in fiscal 2019 to 1.4%
from the 1.5% seen in July and the median inflation rate in fiscal 2020 was also
lowered to 1.5% from 1.6% previously.
     Other key points from the minutes:
     --One member said "the current situation in which the inflation rate didn't
seem to be accelerating toward 2% should be taken seriously, and that in this
situation, making the range of movement in long-term yields more flexible, as
anticipated by some market participants, could be viewed as though the BOJ's
commitment to achieving 2% inflation was compromised."
     --One member emphasized the risk that banks' profits would decrease at an
accelerated pace if the economy moved into a downturn and their credit costs
     --"Most members shared the recognition that, although it was necessary to
carefully examine the fact that firms' cautious wage- and price-setting stance
and households' cautiousness toward price rises, had been persistent, the
momentum toward achieving the 2% inflation was being maintained."
     --"Some members pointed out that the flexible conduct of market operations
and asset purchases decided in July generally had been exerting the intended
effects, given that indicators for the degree of liquidity and functioning of
the Japanese government bond market had improved to some extent."
     --Some members said "it would still take some time for inflation
expectations to rise" to the 2% target.
     --One of those members said that inflation expectations continued to show
relatively weak development and it could not be judged at present that the
inflation rate would increase toward 2%.
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email:
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