MNI POLICY: BOJ Vows To Keep Easy Policy For Extended Period

-BOJ Board Voted 7-2 To Keep Policy Unchanged, Maintains Recovery Outlook

     TOKYO (MNI) - The Bank of Japan kept monetary policy unchanged Wednesday,

as Japan's economy is expanding moderately despite emerging downside risks.

     The board decided voted 7-to-2 to stand pat on the yield curve control

policy and the asset purchases, maintaining its recovery scenario as a worsening

of economic conditions hasn't been observed through economic data.

     The BOJ vowed to maintain the current easy policy "for an extended period

of time."

     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.

     -- 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 maintained its "forward guidance" for policy rates, as the BOJ

vows to keep the current easy policy "for an extended period of time."

     --On forward guidance, board member Yutaka Harada, a former government

economist, dissented, arguing that it would be better to adopt guidance that

would "further clarify its relationship" with the inflation target. Goushi

Kataoka, a former private-sector economist, was also opposed. He repeated his

opinion that it would be better to promise additional easing in the event of a

downward revision to the board's longer-term inflation outlook.

     --The board decided to extend its lending facilities one year to March

2020. Those facilities are the Fund-Provisioning Measures to stimulate bank

lending, the Fund-Provisioning Measure to support strengthening the foundation

for economic growth and the Fund-Supplying operation to support financial firms

in disaster areas.

--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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