REPEAT: MNI: BOJ Kuroda: Must Analyze Slow Prices, Wages

     TOKYO (MNI) - Bank of Japan Governor Haruhiko Kuroda said Wednesday that

central banks in advanced economies must analyze the mechanism behind the slow

response of prices and wages to economic expansion.

     "As the adverse effects from the Global Financial Crisis (of 2007-2008)

subside, the unemployment rate has dropped in many countries and the real

economy has improved substantially, partly due to the effects of large-scale

macroeconomic policies," Kuroda said in his opening remarks to an international

conference hosted by the BOJ.

     "Despite these improvements in the real economy, prices and wages have

remained sluggish. This phenomenon has recently been labeled the 'missing

inflation' or 'missing wage inflation' puzzle."

     Kuroda has blamed the stubborn deflationary mindset among businesses and

households -- the belief that consumer prices are unlikely to rise very much

based on the experience in recent years -- for the slow wage growth and price

gains in Japan.

     "It is urgent that we explore the mechanism behind the changes in price and

wage dynamics especially in advanced economies," he said.

     Kuroda hailed the growth in global trade and investment in the past decade

but also warned that "partly due to the recent dynamics of political economy and

geopolitics, the size of global shocks has been increasing, and the spread of

global economic shocks has been presenting a great challenge for central banks."

     On the financial system, Kuroda called for close attention to developments

in the shadow banking sector, which is not sufficiently covered by conventional

supervision and regulations.

     "Moreover, in recent years, the low profitability of financial

institutions, especially in advanced economies, has come to pose a new challenge

for global financial stability. As such, central banks are faced with new

challenges in terms of financial stability as well," he said.

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