MNI POLICY: BOJ's Kuroda says policy "accommodative"

Hiroshi Inoue

     NAGOYA, Japan (MNI) - Bank of Japan Governor Haruhiko Kuroda has clarified

a downward bias in policy rates through new forward guidance, saying the bank's

policy is "further tilted" towards monetary accommodation.

     "The BOJ will continue to conduct appropriate monetary policy without

preconception, taking account of developments in economic activity and prices as

well as financial conditions, while, carefully examining various risks," Kuroda

told business leaders in Nagoya City on Tuesday.

     At the latest meeting last week the BOJ board left policy settings

unchanged, forgoing an opportunity to take pre-emptive action.

     The bank maintained its view that the economic recovery was continuing due

to solid domestic demand, although downside risks remained.

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

policy rates moving below 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

easing policy "at least around spring 2020."

     Other Key Points and quotes from Kuroda's speech:

     --"The BOJ clearly related the forward guidance to the momentum toward

achieving the price stability target. The BOJ reflected its policy stance of

being tilted towards monetary accommodation in the forward guidance for the

policy rate as well."

     --"It clarified that there would be a downward bias in the policy rates.

However, I would like to add that the this doesn't limit additional easing

measures to lowering the policy rates."

     --"There is no change in our understanding that, besides lowering the

policy rates, there are various possible measures for additional easing - such

as expanding asset purchases and accelerating the expansion of the monetary base

- depending on developments in economic activity and prices as well as financial

conditions, and that combination or applications of these various measures also

would be an option."

     --"Domestic demand is likely to be firm as the impact of the delay of

overseas economies is expected to be limited."

     --"The BOJ's projection for overseas economies doesn't assume further

deceleration. However, this outlook is based on the assumption that the trade

friction will not intensify further."

     --"There also are uncertainties such as over development in emerging

economies and geopolitical risks. Moreover, attention should be paid to the fact

that global financial markets have become more reactive to these risks."

     --"If such downward risks materialize, positive behavior by firms could

become cautious. Besides risks concerning overseas economies, the impact of the

consumption tax hike continue to warrant attention."

     --"As I have explained, although the degree appears to be small for now,

the BOJ will continue to conduct a careful examination of the impact, including

that on consumer sentiment."

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI Sydney Bureau; +61 405322399; email: lachlan.colquhoun.ext@marketnews.com

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