REPEAT:BOJ Keeps Policy Target in 8-to-1 Vote;Kataoka Dissents

Repeats Story Initially Transmitted at 04:17 GMT Sep 21/00:17 EST Sep 21

--New Board Member Says Current Policy Not Sufficient To Reach 2% CPI

     TOKYO (MNI) - The Bank of Japan board decided Thursday in an 8-to1 vote to

maintain its current monetary easing stance under the yield curve control

framework it adopted about a year ago.

     One of the two new board members, Goushi Kataoka, dissented, arguing

current policy was insufficient to meet the central bank's 2% policy goal by the

current target date of sometime in fiscal 2019, according to the BOJ's policy

statement following its meeting. 

     Kataoka was quoted as citing "an excess supply capacity in capital stock

and the labor market" as the reason for his objection but the statement didn't

show any counter-proposals made by him.

     In July, the BOJ pushed back the timeframe for hitting the 2% inflation

target to "around fiscal 2019" from the previous estimate of "around fiscal

2018." It was the sixth delay since the bank began aggressive easing in April

2013.

     Kataoka also opposed the description of the board's inflation outlook.

     Although the year-on-year rate of change in the CPI is likely to increase

for the time being, reflecting developments in crude oil prices and foreign

exchange rates, the possibility of the rate of change increasing toward 2% "from

2018 onward" is low at this point, Kataoka told the board.

     Kataoka, a former economist at Mitsubishi UFJ Research and Consulting, and

Hitoshi Suzuki, who was an executive at the Bank of Tokyo-Mitsubishi UFJ,

official joined the BOJ board on July 24 but participated in their first policy

meeting this week.

     The two replaced skeptics of the aggressive easing that has lasted for more

than four years -- Takahide Kiuchi and Takehiro Sato -- who continued to warn

side-effects of the easing until they left the BOJ on July 23 at the end of

their five-year terms.

     BOJ Governor Haruhiko Kuroda will hold a news conference at 1530 JST (0630

GMT) to discuss the board's decision.

     The board decided to keep the policy targets of guiding the overnight

interest rate at -0.1% and the 10-year bond yield around zero percent.

     The BOJ's asset purchases, which are no longer the main policy target, will

be maintained at the current pace. The outstanding amount of its JGB holdings

will increase about Y80 trillion annually, the BOJ repeated, though recent

purchases have been well below that rate.

     The BOJ repeated it would "make policy adjustments as appropriate, taking

account of developments in economic activity and prices as well as financial

conditions, with a view to maintaining the momentum toward achieving the price

stability target."

     As expected, the board also left its economic assessment unchanged from its

previous meeting in July.

     "Japan's economy is expanding moderately," the BOJ said. "Japan's economy

is likely to continue a moderate expansion."

     Private consumption in Japan "has increased its resilience," backed by

improving employment and income conditions, while exports and industrial

production remain on an uptrend, the BOJ said. Business investment is on a

moderate increasing trend.

     The bank noted overseas economies, on the whole, continued to grow at a

moderate pace.

     The board left its near-term assessment of domestic inflation unchanged

from the previous meeting, repeating, "Inflation expectations have remained in a

weakening phase" given the year-on-year rise in the core CPI (excluding fresh

food) is around 0.5%.

     To gauge the outlook for inflation expectations, BOJ economists are focused

on the corporate inflation expectations portion of the September Tankan business

survey due out Oct. 3 and the household inflation expectations of the central

bank's quarterly survey of consumer sentiment due out Oct. 6.

     The market focus is on the BOJ's next policy meeting on Oct. 30-31, when

the board releases its updated growth and inflation predictions as well as its

risk analysis.

     Ahead of their October meeting, BOJ policymakers will watch how business

sentiment and investment plans are evolving, as revealed in the Tankan survey

and anecdotal evidence from BOJ branch managers who will gather in Tokyo for

their quarterly meeting on Oct. 10.

     The BOJ's analysis of risks were unchanged in Thursday's statement.

     "Risks to the outlook include the following: the U.S. economic policies and

their impact on global financial markets; developments in emerging and

commodity-exporting economies; negotiations on the United Kingdom's exit from

the European Union and their effects; prospects regarding the European debt

problem, including the financial sector; and geopolitical risks," the bank said.

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

--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com