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MNI (London)
Repeats Story Initially Transmitted at 05:40 GMT Nov 5/00:40 EST Nov 5
--Adds Comments From Nagoya Press Conference at Bottom
     NAGOYA, Japan (MNI) - Japan's economic and price conditions don't currently
warrant the Bank of Japan implementing the large-scale policies seen in 2013,
Bank of Japan Governor Haruhiko Kuroda said Monday, although he emphasized the
need of maintaining the easy policy now.
     "Prices have improved steadily compared with five years ago, when the
economy was suffering from deflation. Japan's economic activity and prices are
no longer in a situation where decisively implementing large-scale policy to
overcome deflation was judged as the most appropriate policy conduct, as was the
case before," Kuroda said.
     However, Kuroda ruled out any imminent policy adjustment to mitigate
side-effects, saying, "It has been taking time to achieve the 2% price target." 
     "It has become necessary to persistently continue with powerful monetary
easing while considering both the positive effects and side effects of monetary
policy in a balanced manner," he added.
     Other key points from Kuroda's speech:
     --In order to achieve the 2% price target, "it is important to maintain a
positive output gap - a driver for a rise in inflation - for as long as
possible. To this end, it is necessary to persistently continue with the current
powerful monetary easing."
     --Kuroda sounded a warning over banks' severe business environment. He
warned there was a risk that the business environment facing financial
institutions, especially regional banks, could become more severe.
     --The governor noted that "Margins from loans are falling amid prolonged
low interest rates. Credit costs are falling as the number of bankruptcy
continues falling. Banks are compensating low profits through capital gains, but
they cannot do so forever."
     --He added that if the 2% price target was achieved, the BOJ would move
toward an exit of the easy policy and the yield curve would steepen and interest
rates would rise. But the problems facing financial institutions will not be
fully solved by higher interest rates.
     --Looking forward, the BOJ will examine the risks considered most relevant
to the conduct of monetary policy and conduct its policy in an appropriate
manner, taking account of developments in economic activity and prices as well
as financial conditions.
     --If financial institutions become less risk adverse to secure profits amid
ongoing low interest rates and the competitive environment, the financial system
could destabilize should large negative shocks occur ahead.
     --It is necessary to pay close attention to future developments regarding
these risks and side effects from the viewpoint of conducting monetary policy.
     --Japan's economy has seen limited impact from global trade disputes, but
the BOJ must monitor how investor sentiment and corporate profits develop as
uncertainty over the global economy increases.
     --Protectionist policies will not benefit any economy. The BOJ will
thoroughly examine the consequences of protectionist moves and their effects on
the economy.
     --Japan's prices have been weak compared with the economic expansion and
the labor market tightening. Japan is still far from achieving the 2% stability
target but prices are unlikely to rise quickly, as structural issues putting
downward pressures on prices continue.
     Key Points from Kuroda's Press Conference:
     --"If the BOJ raised interest rate now, it would worsen Japan's economy,"
Kuroda told reporters. The BOJ doesn't currently need to implement large-scale
policy, noting when the BOJ did it in 2013, Japan's economy was seriously
suffering from deflation. He didn't elaborate on his comment. Outlining an exit
of the easy policy isn't a "productive idea," he said.
     --Kuroda said the BOJ's stance of persistently maintaining the current easy
policy to achieve the 2% price target is unchanged.
     --The scale of BOJ purchases of Japanese government bonds is falling on the
back of the tightness of bond supply-demand conditions, but the BOJ continues to
keep its yield curve policy. The annual pace of the BOJ JGB buying has recently
fallen to about Y50 trillion, although the board maintains its stance of buying
JGBs at an annual pace of Y80 trillion.
     --"We don't need to always achieve the 2% price target but do need to keep
the 2% price target for a prolonged period," Kuroda said, adding that the BOJ
maintains its easy policy to achieve the price target at the possible earliest
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email:
--MNI London Bureau; tel: +44 203-586-2225; email:
MNI London Bureau | +44 203-865-3812 |
MNI London Bureau | +44 203-865-3812 |

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