REPEAT: MNI POLICY: BOJ Suzuki Warns of Runaway Easing Costs

     NAHA, Japan (MNI) - Bank of Japan board member Hitoshi Suzuki on Wednesday

warned that the growing side-effects of prolonged large-scale monetary easing

would become too big to control if the central bank didn't keep a close watch on

both the costs and benefits of its policy.

     At the same time, he also said the BOJ board's decision in July to allow a

wider trading range for the benchmark long-term interest rate was not aimed at

pushing up the levels of borrowing costs.

     The BOJ's policy stance to keep zero to negative interest rates has

squeezed profit margins for lenders and slashed investment returns for pension

fund managers.

     In a speech to business leaders in Naha, southwestern Japan, he said, "As

for the conduct of monetary policy, we have to keep a close eye on medium- to

long-term effects and side effects."

     "We must pay a full attention to the risk that it would be difficult to

cope with the situation well or too late to act if the accumulated side-effects

materialize sometime in the future."

     Suzuki, a former commercial banker who joined the nine-member policy board

in July 2017, has voiced concern over the costs of prolonged easing.

     --WATCH FINANCIAL SYSTEM

     In addition to the impact (of easy policy) on government bond markets, we

need to pay attention to the impact of prolonged low interest rates on financial

institutions," he said.

     Suzuki also said the BOJ must watch how the business conditions of

financial institutions including regional lenders will affect the soundness of

the financial system and financial intermediation.

     --NOT RATE HIKE

     Suzuki also said that the BOJ's decision at its July 30-31 meeting to allow

the 10-year Japanese government bond yield to move in a wider range was not

aimed at raising interest rate levels.

     At the meeting, the board decided in a 7-to-2 vote to make its long-term

interest rate target and asset purchases more "flexible," allowing the nearly

flat JGB yield to steepen slightly in line with firmer growth and inflation.

     The statement didn't refer to the bank's new allowance for the same "around

zero" target for the long-term interest rate but Governor Haruhiko Kuroda told

reporters after the meeting that the BOJ was now allowing a wider trading range

of +0.2% to -0.2% for the 10-year JGB yield, double the previously unpublished

range of +0.1% to -0.1%.

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