UPDATE 1-BOJ mins suggest more easing possible in months ahead

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

* Many members sounded more upbeat about economy

* Government pressure to stay as deflation weighs

* Bank lending slides at fastest pace in four years

* Bigger firms turning to capital markets for funding
(Adds details)

By Rie Ishiguro

TOKYO, April 12 (BestGrowthStock) – Many Bank of Japan policy board
members played up the effectiveness of extra monetary easing even
as the economy recovers and deflation eases, the minutes of the
BOJ’s mid-March meeting showed, suggesting it could loosen policy
more in the months ahead.

At the March 16-17 meeting, the BOJ eased policy by doubling
to 20 trillion yen ($214.7 billion) the funds available to banks
for three-month loans at its policy rate of 0.1 percent,
following a drumbeat of government pressure. [ID:nSGE62G03I]

Still, companies remain reluctant to borrow from banks to
boost capital spending, while bigger players are turning instead
to the market for cash. Outstanding loans held by Japanese banks
fell 1.8 percent in March from a year earlier — the fastest pace
of decline in more than four years.

“Big companies can now tap the capital markets,” said Junko
Nishioka, chief economist at RBS Securities in Tokyo.

“Fund demand will eventually recover as the economy recovers,
but pressure on the Bank of Japan for further easing will remain
as deflation is persisting.”

The BOJ minutes showed that many supported the additional
easing move even though they were more optimistic about the
economy and said the risks of a major slowdown in the first half
of 2010/11 had receded.

Some also said a sustained recovery in domestic demand was
possible if growth stays high in that period.

The continued recovery could lead the central bank to upgrade
its economic assessment in its twice-yearly outlook report due
out on April 30.

Many board members argued in March that boosting the size of
the cheap fund supply tool adopted in December and thus further
lowering interest rates beyond the overnight rate “would solidify
improvements in the economy and prices,” the minutes showed.

The BOJ board held off on new policy initiatives at a
subsequent meeting last week and gave a slightly more positive
view than before on the economy, cooling expectations for further
easing in coming months.

NODA, SUDA SAY EASING INAPPROPRIATE

The board’s decision in mid-March was by a split vote, which
suggested that a divided board may not be so compliant in the
face of government demands for easier monetary conditions.

Board members Tadao Noda and Miyako Suda opposed the decision
and argued that the economic recovery did not justify more
easing.

“The economy’s outlook is somewhat overshooting forecasts and
prices are moving in line with (the BOJ’s) January forecasts, and
there are no sudden moves in financial markets … Additional
easing is inappropriate in view of continuity in communicating
with markets,” Noda said.

One member said caution was needed over the impact additional
easing would have on market functions, according to the minutes.

In a sign of continued pressure, a government representative
urged the BOJ to ensure “more ample and smooth fund supplies in
order to show its resolve to overcome deflation,” according to
the minutes.

The BOJ board has now been joined by Ryuzo Miyao, an academic
and expert on monetary policy, who told his first news conference
in late March that monetary easing could boost growth even when
the economy is picking up, suggesting he would not oppose more
easing to beat deflation. [ID:nTOE62P07R]

The BOJ’s nine-member board will be complete for the first
time since 2008 when Yoshihisa Morimoto, a director at Japan’s
largest power company, joins in July. [ID:nTOE62P016]
Stock Market Today

($1=93.15 Yen)
(Editing by Hugh Lawson)

UPDATE 1-BOJ mins suggest more easing possible in months ahead