MNI POLICY: BOJ Nakamura: Policy Affects on Market  Function

The Bank of Japan must pay attention to how easy monetary policy affects the functioning of financial markets, BOJ board member Toyoaki Nakamura said on Wednesday.

"The BOJ needs to examine whether the asset purchases and others have produced expected results," Nakamura told business leaders in Kochi City via an online.

Nakamura said the BOJ should assess further effective and sustainable easy policies after examining the effects and side-effects of the current easy policy.

Nakamura, a former Hitachi Ltd. Director and who took office on July 1, also said that ETF (exchange traded-funds) buying has been effective in preventing unstable stock markets from causing a deflationary mindset. ETF buying was a necessary tool, he said.

However, he added: "The BOJ must pay attention to the risk that a large scale of asset purchases and holdings them for a prolonged period will have impact on functioning in markets."

He also said that the BOJ must stand ready to take necessary action in a timely and flexible manner.

PRICES

Nakamura said that corporate price cuts have not been expanded and there was no major risk that prices would continue to fall.

However, he warned of a high possibility that it will take a long time for non-manufacturers to recover amid the spread of infections.

"Corporate profits are expected to stay below pre-coronavirus and labor and income conditions will remain weak," he said, adding that the BOJ must pay attention to the risk that a drop in prices will affect people's views and confidence.