MNI POLICY: Funo: BOJ Won't Raise Rates, Must Watch Risks

     TOKYO (MNI) - Bank of Japan (BOJ) board member Yukitoshi Funo said

Wednesday that the board's decision of allowing the 10-year interest rate to

move widely in July doesn't mean that the BOJ will raise interest rates. 

     In a speech to business leaders in Kochi City, southern Japan, Funo said

that "if (the BOJ) maintained the powerful easy policy, it would affect business

conditions at financial institutions through a drop of margin from loans, which

in turn will create the risk of a pullback in financial intermediation."

     "We continue to pay attention to the risks considered most relevant to the

conduct of monetary policy," Funo continued while  indicating that the BOJ

doesn't need to adjust policy to mitigate the side effects of a prolonged easy

policy.

     Other key points from Funo's speech:

     -The BOJ will conduct monetary policy in an appropriate manner to achieve

the 2% price stability target, taking into account developments in economic

activity and prices as well as financial conditions.

     -Funo maintains an optimistic outlook by saying Japan's economy is expected

to expand moderately.

     --BOJ must pay attention to high uncertainties over trade policies'

development and impact on the global economy, even as global economy  continue

to grow firmly on the whole.

     --Japan's prices remain weak compared with a moderate economic expansion

and the tightness in the labor market.

     --Expects Japan's inflation rate to move toward the 2% price target but

warned the risks that corporate price-setting remains cautious.

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

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

[TOPICS: MAJDS$,MMJBJ$,M$A$$$,M$J$$$,MT$$$$]