December 20, 2018 / 6:48 AM / a month ago

HIGHLIGHTS-BOJ Governor Kuroda's comments at news conference

TOKYO, Dec 20 (Reuters) - The Bank of Japan kept monetary policy steady on Thursday and stuck to its optimistic view on the economy, even as simmering Sino-U.S. trade tensions and volatile financial markets cloud the outlook for global growth.

In a widely expected move, the BOJ maintained its short-term interest rate target at minus 0.1 percent and a pledge to guide 10-year government bond yields around zero percent.

Following are comments from BOJ Governor Haruhiko Kuroda at his post-meeting news conference:

IMPACT OF TRADE FRICTIONS ON JAPAN’S ECONOMY

“There are more downside risks to Japan’s economy, particularly via overseas economic developments... If trade frictions persist, that could have a broad impact on Japanese and overseas economies.”

“But the BOJ’s tankan survey and our internal hearings show the impact of trade frictions on Japan’s economy is limited for now. We need to be vigilant to various risks. But at present, there’s no change to our view Japan’s economy is expanding moderately.”

“The momentum for achieving our price target is sustained.”

ON WHETHER THE BOJ HAS ANY POLICY AMMUNITION LEFT

“If we think doing so would be necessary to sustain the momentum for achieving our price target, we will ease monetary policy further as appropriate.”

“Options include cutting the short-term interest rate target, lowering the long-term yield target, ramping up asset buying and accelerating the pace of increase in base money. Should the need arise, we will take steps as appropriate.”

ON MARKET VOLATILITY

“It’s true investors’ risk-aversive stance is intensifying, causing some volatility in Japanese and overseas markets. But corporate profits, which serve as a basis for stock price moves, are strong in Japan, Europe and the United States.”

“There’s no change in economic fundamentals and currency moves are fairly stable.”

“It’s true we need to be vigilant to various risks, including from overseas. But there’s no change to our baseline view on Japan’s economy and its outlook. If necessary, we have means available to ease monetary policy further.”

ON RECENT FALLS IN 10-YEAR JAPANESE GOVERNMENT BOND YIELDS

“The recent moves are natural as Japanese yields are falling in line with declines in European and U.S. long-term rates. I don’t think this is something problematic. There’s no change to our zero percent 10-year yield target, and we’ve decided to allow yield to move in a wider band to better reflect economic, price and financial developments.”

“I personally don’t see any problem with recent Japanese yield moves, as they are reflecting overseas bond market developments.”

ON ONE-OFF FACTORS THAT MAY WEIGH ON INFLATION NEXT YEAR SUCH AS EXPECTED CUTS IN CELL PHONE CHARGES AND EDUCATION FEES

“The effects are temporary when looking at the impact on trend inflation. But in Japan, inflation expectations are adaptive so could be affected... We will continue to monitor the effect carefully.”

ON HOW THE BOJ COULD ADDRESS SIDE-EFFECTS OF EASY MONETARY POLICY

“Our biggest mission is to achieve our price target. There is no need to exit easy policy and it’s too early to debate a strategy now.”

“The financial system needs to be in good shape for monetary policy to be effective. We will closely cooperate with the Financial Service Agency and strive to restore financial system health.”

ON WHETHER THE BOJ’S BUYING OF EXCHANGE-TRADED FUNDS IS DISTORTING MARKETS

“I don’t think our purchases are causing distortions or any big impact on Tokyo’s stock market.”

ON CHANCE OF JAPANESE LONG-TERM RATES FALLING TO NEGATIVE TERRITORY

“Even if 10-year yields fall below zero, it won’t be a problem as long as they move within the range we said we will tolerate.”

“If yields move in a way reflecting economic and financial developments, we could say it’s a sign bond market functions are improving. If yields move in a way that deviates economic fundamentals and well beyond the range we tolerate, then there are steps we could take.”

Reporting by Leika Kihara; Editing by Subhranshu Sahu

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