Trial now
     AKITA, Japan (MNI) - it is appropriate for the Bank of Japan to maintain
its current powerful easy policy while paying attention to developments of both
the stability of the financial system and economic conditions, board member
Makoto Sakurai said Thursday.
     "It's important for the BOJ to examine the side-effects of easy policy and
to keep the sustainability of the easy policy," Sakurai said in a speech to
business leaders in Akita City, northern Japan.
     At the BOJ's previous policy meeting on Sep 18-19, the board decided in a
7-2 vote to maintain its current monetary easing stance under the yield curve
control framework, vowing to keep very low interest rates "for an extended
period of time."
     Other key points from Sakurai's speech:
     --Sakurai, an advocate of the idea that the BOJ must keep a close eye on
the side-effects of easy policy, warned, "Maintaining the easy policy to achieve
the price stability target will cause a risk the financial and economic
imbalances accumulate."
     --Low interest rates will lower banks' profits and undermine banks' capital
bases, which in turn will slow banks' risk-taking activities. If banks' assets
worsened, it would impair banks' ability to maintain businesses, which will
worsen functioning in the financial system.
     --The BOJ must examine financial imbalances and manage monetary policy in
an appropriate manner, he said, without elaborating how the BOJ addresses the
risks its facing now.
     --Sakurai also voiced concern over increasing uncertainties regarding the
outlook for the global economy and over downside risks from trade disputes and
fund outflows from emerging economies.
     --Sakurai gave an optimistic outlook for Japan's economy, but warned of the
risk that Japan's economy may deviate from the baseline scenario, depending on
the degree of shock caused from protectionism and emerging economy fund
     --On inflation rates, Sakurai said Japan's price moves are weaker than
initially expected on the back of downward price pressure stemming from a
deep-rooted deflationary mindset and corporate productivity improvements to
absorb higher costs.
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email:
--MNI London Bureau; tel: +44 203-586-2225; email:
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