MNI REVIEW: BOJ Kuroda Flags Further Easing Possible In Oct

     TOKYO (MNI) - Bank of Japan Governor Haruhiko Kuroda flagged Thursday that

the central bank may conduct further easing at its next policy meeting if

concern grows that momentum towards its price stability target will be lost amid

greater downside risks to the global economy.

     Kuroda told reporters, "I'm more positive on further easing than the

previous meeting in July", although he somewhat downplayed his remarks, saying

that it doesn't mean that the BOJ committed to conduct further easing then.

     The BOJ clarified the current severe economic and financial conditions and

how to deal with them ahead of the next meeting when the BOJ board updates its

medium-term outlook for economic growth and inflation rate.

     The BOJ strengthened its risk assessment, saying, "Downside risks

concerning overseas economies seem to be increasing, and it also is necessary to

pay close attention to their impact on firms' and households' sentiment in

Japan."

     Japan's economy remains caught in a tug of war between solid domestic

demand and weak overseas economies, reducing the necessity of conducting more

easing now, allowing the BOJ to see developments play out.

     --OPTIONS

     The BOJ will face a difficult decision on whether and how to conduct

further easing at the October policy-setting meeting as it is running out of

effective tools to stimulating economic activity.

     When asked about policy options, Kuroda repeated the four tools that

previously noted, including lowering either/both the short-term and long-term

policy interest rates, and expanding asset purchases.

     He also added that the BOJ will decide on appropriate policy after

examining the benefits and costs of more easing, although he did not elaborate

on possible measures to mitigate the side-effects on commercial banks and the

financial system.

     Earlier in the day, the BOJ left monetary policy unchanged but vowed to

re-examine economic and price developments at the next policy meeting in

October.

     "Downside risks to economic activity and prices, mainly regarding

developments in overseas economies, are significant," the BOJ said.

     "Slowdown in overseas economies have continued to be observed and their

downside risks seem to be increasing, the BOJ judges that it is becoming

necessary to pay closer attention to the possibility that the momentum toward

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

     It also said, "The BOJ will re-examine economic and price developments at

the next monetary policy meeting on Oct. 30-31, when it updates the outlook for

economic activity and prices."

--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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