REPEAT: MNI: BOJ Kuroda: Policy Appropriate; To Act If Needed

Repeats Story Initially Transmitted at 12:16 GMT Dec 4/07:16 EST Dec 4

     TOKYO (MNI) - The current nearly flat Japanese government bond yield curve

is appropriate for sustained growth and stable prices without hurting the

functioning of the banking system, BOJ Governor Haruhiko Kuroda said Monday.

     But he also told a financial forum that the central bank would take action

to prevent any unfavorable factors from preventing the central bank from

achieving its 2% inflation target. 

     Japan's annual inflation rate measured by core CPI (excluding fresh food)

is still below 1%.

     Under its yield curve control policy framework adopted in September 2016,

the BOJ is seeking to stabilize the 10-year government bond yield, the benchmark

for long-term borrowing costs, "around zero percent" and keep the overnight

interest rate at -0.1%.

     Kuroda called the current yield curve "quite appropriate" for guiding

inflation to the bank's 2% price stability target.

     He was asked if he had recently changed his view on the unfavorable impact

of continued large-scale monetary easing with negative interest rates, which has

squeezed profit margins for commercial banks and depressed returns on bond

investments by pension funds.

     Instead of replying directly, the governor noted the BOJ has already

reviewed the pros and cons of its policy stance and made necessary changes.

     BOJ's quantitative and qualitative monetary easing, which was launched in

April 2013, had intended effects but there were also some negative side-effects,

which prompted the bank to change its policy framework, shifting the focus of

its target from asset purchases to control of interest rates, he said.

     However, he added: "If anything happens and undermines the momentum toward

achieving the price target, we would act."

     So far, without any major financial problems, the Japanese economy has

maintained a modest recovery, with the GDP growing for the seventh straight

quarter in the July-September period, he said.

     In his speech at the University of Zurich last month, Kuroda mentioned a

"reversal rate," referring to the risk that an excessive drop in interest rates

would impair financial institutions' intermediation function.

     Under these circumstances, "the effects of monetary easing on the economy

reverses and becomes contractionary," he said.

     His comments triggered speculation in financial markets that the BOJ is

considering beginning to unwind its large-scale monetary stimulus or, at the

very least, that Kuroda had no intention of conducting any further monetary

easing.