UPDATE: MNI: Kuroda: Rate Hikes Would Slow Hitting 2% Target

--Adds More Comments From 7th Paragraph

     TOKYO (MNI) - Bank of Japan Governor Haruhiko Kuroda Thursday ruled out any

imminent rate hikes, saying higher policy interest rates now would slow the

timing in achieving the 2% price target.

     "Premature discussion of exit strategy from the easy policy will confuse

financial markets," Kuroda told lawmakers. The BOJ board won't discuss exit

strategy until the 2% inflation target is hit or is in sight, and then they will

send the necessary information to markets.

     He also said that the momentum toward achieving the 2% price target has

been maintained, although it isn't yet sufficiently embedded.

     "We patiently maintain the easy policy in order to achieve the 2% price

target. I don't think there is a limit of (the BOJ's) easy policy," Kuroda said.

     Ongoing trade disputes remain the biggest risk facing Japan's economy and

the BOJ continues to monitor developments, keeping a close eye on any impact to

the overall Asian economy.

     Kuroda also said there will likely only be a small direct impact on private

spending after the consumption tax hike to 10% from 8%, planned for October

2019, although the BOJ is paying close attention to how the sales tax hike

affects consumer sentiment, with the central bank ready to take any appropriate

action.

     Kuroda indicated that the BOJ has no plan to abandon its 2% target, saying,

"It is appropriate for the BOJ to achieve the 2% target, which is a global

standard, and achieving the 2% target will contribute to stabilizing foreign

exchange rates."

     "Japan isn't in deflation but we aim to achieve the 2% price target, so we

patiently maintain the easy policy," Kuroda added. 

     "Maintaining the current powerful easy policy is enough to achieve the 2%

price target," Kuroda said, noting that the BOJ has said that it will maintain

the current extremely low levels of short- and long-term interest rates "for an

extended period of time."

     As for the side-effects of easy policy, Kuroda maintained the view, "There

is no overheating in financial markets" amid prolonged low interest rates but

the BOJ continues to carefully monitor developments in the financial system. He

also said that there is no obstacles to the intermediation role in financial

markets.

     When asked about purchases of Japanese government bonds, Kuroda said that

there was a high possibility that the duration of JGBs held by the BOJ will

lengthen in the future on a stock basis from the current period of about eight

years.

     "Buying JGBs are essential to stabilize a broad range of interest rates at

low levels," Kuroda said.

     The scale of JGBs purchased by the BOJ has fallen recently, thanks to the

tight market conditions, which has enabled the BOJ to reduce purchases. Despite

the drop in purchases, interest rates continue to stay at low levels, reflecting

the stock effect of BOJ action, Kuroda said.

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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