REPEAT: MNI: 5 THINGS: BOJ Funo: Low Bank Risk, Watch Slow CPI

     SENDAI, Japan (MNI) - Bank of Japan board member Yukitoshi Funo said

Thursday that he sees a low risk that the bank's large-scale monetary easing

will hamper commercial banks' intermediation role in the economy, even though

zero interest rates are squeezing lender profits.

     Funo also told business leaders in Sendai City, northern Japan, that

consumer prices remain weak as firms are cautious about raising wages and prices

amid uncertainty. He called for a close watch on downside risks to prices and

inflation expectations.

     At its latest policy meeting on June 14-15, the BOJ board decided in an

8-to-1 vote to maintain its cautiously stimulative monetary easing stance under

the yield curve control framework.

     The key points from Funo's speech:

     -- There is a risk that if downward pressure on profits at financial

institutions under low interest rates continued, banks' intermediation function

would stagnate or the financial system would destabilize. But such a risk is not

high at this point because banks have sufficient capital bases.

     -- Overheated activities among financial institutions or excessively

bullish expectations in the asset markets have not been observed.

     -- It takes some time before companies raise wages and prices at a faster

pace. If weak prices continued, a rise in inflation expectations among

households and firms would be delayed. The BOJ must carefully watch for the

risk.

     -- The momentum toward achieving the 2% inflation target is maintained but

Japan is still far from the inflation target, and thus the BOJ must persistently

maintain the current easy policy.

     -- The BOJ needs to pay attention to various risks including the U.S.

economic policies and its impact on global financial markets, geopolitical risks

and the uncertainty over trade policies.

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