UPDATE 1-BOJ minutes: unstable shares may hurt spending

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

* Tight fiscal policy, jittery market seen a minus for Europe

* Some see ripple effect from Europe on Japan corporate debt

By Rie Ishiguro

TOKYO, July 21 (BestGrowthStock) – Japanese consumer spending could
be hurt by unstable share prices stemming from European sovereign
debt problems, a few Bank of Japan board members said at a June
policy meeting, minutes showed on Wednesday.

At the meeting, held when markets were jittery about European
sovereign debt woes, many members shared the view Europe’s
economy may be negatively affected by tight fiscal policy and
that if markets remained strained, this may further push down
growth in the region, the minutes showed.

But the central bank was relatively upbeat in its assessment
of the domestic economy, saying it is on a recovery track.

The BOJ stood pat on its policy last week and said emerging
markets would help the economy grow 2.6 percent this fiscal year,
its fastest pace in a decade, while warning that Europe’s debt
woes posed an increased risk to the outlook. [ID:nTOE66E03G]

Analysts say the BOJ could ease policy further if risks to
the economic recovery emerge, such as another sharp rise in the
value of the yen, and prompt renewed pressure from a government
whose fiscal hands are tied, to do more to support the economy.
[ID:nTOE667043]

The BOJ has kept rates at 0.1 percent since late 2008, but
the government pressured it to ease policy further late in 2009
when the yen shot up to a 14-year high of 84.82 per dollar.

The June minutes showed some members said Japan’s corporate
bond market was feeling some ripple effects from Europe’s debt
woes, although many members said conditions in the corporate bond
market remain favourable.

One member warned that there were downside risks to the
Japanese economy in the second half of this fiscal year as
government stimulus fades.

There was also a warning from one member that downward
pressure on prices remains strong.

At the meeting, the central bank also set details of its new
loan scheme aimed at beating deflation over the longer term,
saying it would provide up to 3 trillion yen to industries with
growth potential. [ID:nTOE65E036]

Some members said the scheme could lead to stable prices if
it proves effective in supporting growth.
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(Editing by Edwina Gibbs)

UPDATE 1-BOJ minutes: unstable shares may hurt spending