HIGHLIGHTS 3-BOJ’s Suda: buying more risk assets an option

(For more stories on the Japanese economy, click [ID:nECONJP])

YAMAGATA, Japan, Dec 1 (BestGrowthStock) – Bank of Japan policy board
member Miyako Suda said on Wednesday that buying more types of
risk assets or boosting the size of the central bank’s
asset-buying fund are options in the BOJ’s policy arsenal.

Suda also said she would not rule out the possibility of the
BOJ buying foreign bonds in the future, although that possibility
was very low.

Below are key quotes from Suda’s speech to business leaders
in Yamagata, northern Japan, and a news conference that followed.

ASSET BUYING

(From news conference)

“Buying risk assets cannot be categorised as traditional
central bank policy … But I have in mind the possibility of
expanding purchases (of risk assets), taking into account the
costs and benefits.”

Asked if she considered including foreign bonds among assets
the BOJ buys with its asset purchase pool:

“I did consider this as an option, but I saw more cost than
benefit under current conditions. But that is not to say I’m
ruling this out as an option completely. The possibility is very
low but not zero.”

(From speech)

“The main purposes of the (5 trillion yen, or $60 billion)
asset buying scheme are to push down long-term rates and various
risk premiums. Markets tend to focus on the size of the fund but
‘quantity’ is not the direct purpose of this easing step.

“Rather, the expansion of ‘quantity’ would only result from
the BOJ’s targeting to lower long-term rates and risk premiums.”

JAPAN ECONOMY

“There’s a strong chance the economy will contract in
October-December in reaction to greater-than-expected growth in
July-September.

“Financial markets are not stable as there is high
uncertainty in the economy and the financial situation at the
moment … Considering the impact from recent yen rises and the
worsening of sentiment among companies and consumers, the risk of
prolonged weakness in the economy remains high.”

DEFLATION

“I don’t see a high possibility of core CPI turning positive
year-on-year by the end of the next fiscal year and expect it
will take time to make progress towards the end of deflation. I
even see that possibility lowering, taking into account the shift
of the base year for CPI to fiscal year 2010, which will happen
next fiscal year.”

EUROPE DEBT CRISIS

“There is renewed market interest in the sovereign problem in
the peripheral European nations amid uncertainty over the
response by governments.

“We therefore need to keep a close watch on some unstable
moves in European and U.S. financial markets.”

RATE POLICY

“I am aware of the view that cutting the 0.1 percent interest
paid on excess reserves that commercial banks park at the central
bank would help lower the overnight call rate.

“But if the call rate falls too much, this would lead to a
loss of opportunities for commercial banks to make profits …
and ultimately cause a sharp drop in the number of market
participants, as was the case with the BOJ’s past quantitative
easing.

“This, as a result, would dampen the effects of easing … I
thus think there are more drawbacks in cutting the 0.1 percent
interest on excess reserves.”
($1=83.57 Yen)
(Reporting by Leika Kihara; Editing by Michael Watson and Edmund
Klamann)

HIGHLIGHTS 3-BOJ’s Suda: buying more risk assets an option