UPDATE 2-BOJ Yamaguchi warns of economic risks, hints at easing

* Yamaguchi warns of weak outlook, less upbeat than governor

* BOJ officials do not rule out easing this month or December

* BOJ offers to buy govt bonds under asset buying scheme

* Index measuring current economic conditions fall in Sept
(Adds coincident indicators index)

By Leika Kihara

TOKYO, Nov 8 (BestGrowthStock) – Bank of Japan Deputy Governor
Hirohide Yamaguchi warned of looming risks to Japan’s economy,
stressing that the central bank was ready to boost its asset
buying scheme if it sees clear signs of a downturn.

Yamaguchi told parliament on Monday that despite strong
growth in some emerging and resource-producing countries, there
were considerable risks to global growth and very high
uncertainty persisted about the U.S. eoconomic outlook.

“We need to be quite mindful of downside risks to Japan’s
economy,” Yamaguchi, one of the BOJ’s two deputy governors, said.

“In case there are clear signs of downturn in the economy and
prices, we are ready to act flexibly and decisively, including
boosting the asset buying fund,” he said.

Yamaguchi sounded less optimistic than Governor Masaaki
Shirakawa, who on Friday described risks to Japan’s economy as
evenly balanced.

Economic growth probably picked up in July-September mainly
because of a last-minute boost from expiring stimulus steps, but
analysts expect a steep slowdown in the ensuing quarter as
exports lose momentum and consumption cools. [ID:nTOE6A0069]

Confirming the slowdown, a measure of current economic
conditions fell in September for the first time in 18 months,
prompting the government to lower its assessment of the indicator
for the first time since October 2008. [ID:nTKU106343]

The BOJ kept monetary policy unchanged last week and rolled
out its 5-trillion-yen ($62 billion) scheme, under which it will
inject funds into the economy by buying assets ranging from
government bonds to corporate debt. [ID:nTOE6A400Q]

It started the plan on Monday by offering to buy 150 billion
yen of government bonds and Yamaguchi echoed Shirakawa’s
commitment to expand the size of the fund if economic conditions
deteriorate.
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For a graphic on Fed, BOJ balance sheets:

http://link.reuters.com/ved62q

For a Factbox on asset buying plan: [ID:nTOE6A403T]

For more stories on the Japanese economy: [ID:nECONJP]

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BOJ officials do not rule out easing policy later this month
or in December, if the yen surges above its all time high against
the dollar, hurting already slowing economy.

The central bank’s next scheduled policy review is on Dec.
20-21 after it moved forward to last week a meeting originally
set for mid-November. That means the BOJ would need to hold an
emergency meeting if it wanted to act sooner than late next
month.

Whether and when the BOJ will relax its policy further will
much depend on the yen as its strength hurts the export-reliant
economy by making Japanese goods more expensive overseas and
hurting business sentiment.

The BOJ last eased its policy early in October by setting a
0-0.1 percent target range for its benchmark rate, pledging to
keep rates effectively at zero until the end of deflation was in
sight, and by announcing the asset buying plan.

The size of the asset buying pool now effectively serves as
the gauge of the BOJ’s monetary easing.

The plan was greeted with scepticism, given that the BOJ’s
planned injection pales in comparison with the Federal Reserve’s
latest $600 billion economic stimulus, even considering that the
U.S. economy is nearly three times as big as Japan’s.
(Additional reporting by Tetsushi Kajimoto, editing by Tomasz
Janowski)

UPDATE 2-BOJ Yamaguchi warns of economic risks, hints at easing