MNI POLICY: BOJ Stands Pat on Policy, Tweaks Forward Guidance

--BOJ Will Not hesitate to take additional easing measures

--BOJ Voted 7-2 To Keep Policy Unchanged

     TOKYO (MNI) - The Bank of Japan left policy unchanged Thursday, rejecting

the chance to buy some insurance and take pre-emptive policy action as it

maintained the view that the recovery was continuing as solid domestic demand

continued to underpin the recovery, although downside risks remained.

     The BOJ did tweak its forward guidance, indicating that it will tolerate

policy rates moving below the current levels.

     "As for the policy rates, the BOJ expects short- and long-term interest

rates to remain at their present or lower levels as long as it is necessary to

pay close attention to the possibility that the momentum toward achieving the

price stability target will be lost," the BOJ said.

     The previous forward guidance was that the BOJ will maintain the current

easy policy "at least around spring 2020."

     These are teh key points from the latest BOJ board decision:

     --The BOJ repeated, "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."

     --On the monetary policy, the board voted 7-to-2 to stand pat on the yield

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

as domestic demand remains solid, supporting an economic recovery mechanism.

     --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 extent" in line with the changes in economic growth and

inflation.

     --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."

     --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.

     --As for re-examination of the outlook for economic activity and prices,

the BOJ said, "the BOJ judged that, although there had been no further increase

in the possibility that the momentum toward achieving the price stability target

would be lost, it was necessary to continue to pay close attention to the

possibility."

     --"With regard to price developments, uncertainties over both the output

gap and medium- to long-term inflation expectations remain significant."

--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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