MNI POLICY: BOJ On Hold; Keep Easy Policy Through Spring '20

--BOJ Will Not Hesitate To Take Additional Easing Measures

--BOJ Voted 7-2 To Keep Policy Unchanged

     TOKYO (MNI) - The Bank of Japan backed away from any pre-emptive easing

measures Tuesday, 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 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," the BOJ said in the accompanying statement as a nod to

those risks.

     "In particular, in a situation where downside risks to economic activity

and prices, mainly regarding developments in overseas economies, are

significant," the BOJ added.

     --GLOBAL SLOWDOWN

     The impact from the slowing global economy is limited to certain

manufacturers and hasn't spilled over into capital investment and private

consumption, with the economy not yet deviating from the recovery path.

     Looking ahead, if there is a prolonged slowing of the global economy,

domestic demand will lose momentum, increasing pressure on the BOJ to consider

additional easy policy measures.

     The decisions reflected the BOJ assessment that Japan's economy will follow

its baseline recovery scenario for now, although sustained uncertainties over

global growth continue to weigh on the outlook.

     --UNCHANGED

     On the monetary policy, the Board decided voted 7-2 to stand pat on the

yield curve control policy and the asset purchases, maintaining its recovery

scenario as domestic demand remains solid, supporting the recovery mechanism.

     The key points from the BOJ board decision after the latest two-day policy

meeting:

     --Under the yield curve control framework adopted in September 2016, the

BOJ will keep the target for the overnight interest rate at -0.1%.

     -- The BOJ will continue buying JGBs to stabilize the 10-year yield "around

zero percent" but it will also allow the long-term interest rate to "move upward

and downward to some extend" in line with the changes in economic growth and

inflation.

     --The BOJ also left the scale of its purchases of ETFs (exchange-traded

funds) and J-REITs (Japan real estate investment trusts) unchanged at about Y6

trillion and about Y90 billion, respectively.

     --Officially, the BOJ will maintain the annual pace of its JGB purchases at

around Y80 trillion, although the pace has declined sharply, as the accumulated

effects of keeping rates lower through asset purchases have intensified. The

bank noted it will conduct purchases "in a flexible manner."

--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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