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The remarks came amid simmering market speculation that creeping inflation and robust wage growth will prod the Bank of Japan (BOJ) to tweak its yield control policy at a two-day rate review ending on Friday. Under the joint agreement with the government signed in 2013 and re-confirmed by the current administration, the BOJ pledges to achieve 2% inflation at the earliest date possible. The remarks differ in tone from those made earlier on Monday by top currency diplomat Masato Kanda, who said recent inflation and wage rises were overshooting expectations. On Friday, Kanda told Reuters that "various expectations and speculations are spreading about the possibility of some kind of tweak to monetary policy." Sources have told Reuters the BOJ is leaning toward keeping its yield control policy steady this week, though there is no consensus within the bank.

Persons: BOJ, Kanda, Yoshihiko Isozaki, Isozaki, Isozaki's, Masato Kanda, It's, Kazuo Ueda, Leika Kihara, Kantaro Komiya, Kim Coghill, Lincoln Organizations: Bank of Japan, Reuters, Thomson Locations: TOKYO

Summary BOJ has kept easy policy with eye on market functionSustained achievement of BOJ's price goal still distantUeda's remarks come amid speculation of July policy tweakJuly 18 (Reuters) - Bank of Japan (BOJ) Governor Kazuo Ueda said on Tuesday there was still some distance to sustainably and stably achieving the central bank's 2% inflation target, signalling his resolve to maintain ultra-loose monetary policy for the time being. "We have patiently continued our ultra-loose monetary policy under yield curve control (YCC)," with due consideration to the impact on financial intermediation and market function, Ueda told a news conference after attending a G20 finance leaders' meeting in India. Ueda said the BOJ will scrutinise at each policy meeting the pace of progress Japan was making in sustainably achieving its 2% target. "If our assumption (that sustained achievement of 2% inflation remains distant) is unchanged, our overall narrative on monetary policy remains unchanged," he said. Reporting by Leika Kihara and Tetsushi Kajimoto in Tokyo; Editing by Bernadette Baum and Christina FincherOur Standards: The Thomson Reuters Trust Principles.

Persons: Kazuo Ueda, Ueda, Leika Kihara, Bernadette Baum, Christina Fincher Organizations: Bank of Japan, Reuters, Thomson Locations: India, Japan, Tokyo

"The tankan confirmed our view that Japan's economy is on track for a moderate recovery," said Atsushi Takeda, chief economist at Itochu Economic Research Institute. "While input prices have declined, output prices continue to rise in a sign companies are being able to pass on costs. Big manufacturers expect business conditions to improve three months ahead, while non-manufacturers project a deterioration on worries over high costs, the tankan showed. The tankan showed corporate inflation expectations moderate in June from three months ago, but remaining above the BOJ's target five years down the road. Companies expect inflation to hit 2.6% a year from now, down from a 2.8% projection made in March, and 2.2% in three years, also lower than 2.3% in March.

Persons: Atsushi Takeda, Kazuo Ueda, Leika Kihara, Shri Navaratnam Organizations: Big, Bank of Japan's, Itochu Economic Research Institute, Nikkei, Companies, Thomson Locations: TOKYO

It was the first time the BOJ summary showed a board member explicitly mentioning the need for an early debate of a tweak to YCC, which contrasts with Governor Kazuo Ueda's remarks ruling out any imminent change in policy. Under YCC, the BOJ guides short-term interest rates at -0.1% and the 10-year bond yield around zero as part of efforts to sustainably achieve its 2% inflation target. Some market players bet the central bank could tweak YCC, such as by widening the allowance band set around the 10-year yield target, as early as July to address market distortions caused by its huge bond buying. FRESH YEN WORRIESYCC is also blamed by some analysts for causing an unwelcome yen fall that pushes up raw material import costs. However, Kanda stopped short of saying Japan was ready to take "decisive action" - language he used shortly before Japan stepped into the currency market last year.

Persons: policymaker, Kazuo Ueda's, Ueda, Daisaku Ueno, MItsubishi UFJ, MItsubishi UFJ Morgan Stanley, YCC, Masato Kanda, Kanda, Shunichi Suzuki, Japan's, Leika Kihara, Shri Navaratnam, Sam Holmes Organizations: Bank of Japan, MItsubishi, MItsubishi UFJ Morgan, MItsubishi UFJ Morgan Stanley Securities, Finance, Thomson Locations: TOKYO, Japan, Asia

But there's very high uncertainty on next year's wage negotiations and the sustainability of wage growth," Governor Kazuo Ueda told a briefing. The BOJ's decision contrasts sharply with that of the European Central Bank, which raised borrowing costs to a 22-year high on Thursday. NOT ENTIRELY DOVISHBank of Japan Governor Kazuo Ueda speaks at a group interview with media in Tokyo, Japan, May 25, 2023. The yen's recent decline could also heighten calls from politicians for the BOJ to tweak YCC, as it squeezes households and retailers by pushing up raw material import costs. "But it may be forced to act if the yen weakens further and drives up import costs, angering the public.

Persons: Ueda, Kazuo Ueda, Kim Kyung, We've, Izuru Kato, Leika Kihara, Kantaro Komiya, Sam Holmes, Kim Coghill Organizations: Bank of Japan, European Central Bank, U.S . Federal Reserve, REUTERS, Companies, Totan, Thomson Locations: TOKYO, Bank, Tokyo, Japan

The BOJ's decision contrasts sharply with that of the European Central Bank, which raised borrowing costs to a 22-year high on Thursday and signalled the likelihood of further hikes. Also this week, the U.S. Federal Reserve on Wednesday signalled it was not yet done with its fight against inflation. As widely expected, the BOJ maintained its -0.1% short-term interest rate target and a 0% cap on the 10-year bond yield set under its yield curve control (YCC) policy. An upgrade to the BOJ's inflation forecast in a quarterly review in July is seen as a done-deal, though central bank officials have said a rise in inflation alone won't automatically trigger a policy shift. Ueda has said solid, sustained wage growth must accompany rising inflation for the BOJ to contemplate a policy tweak.

Persons: Kazuo Ueda's, Ueda's, Shigeto Nagai, Izuru Kato, Shunichi Suzuki, Ueda, Leika Kihara, Kantaro Komiya, Sam Holmes Organizations: Bank of Japan, European Central Bank, U.S . Federal Reserve, Oxford Economics, Totan, Graphics, Thomson Locations: TOKYO, Japan

"We expect inflation to quite clearly slow below 2%" toward the middle of the current fiscal year, Ueda told parliament. "Inflation is likely to rebound thereafter ... though there is high uncertainty" on the outlook, he added. Positive signs included a likely big increase in pay in this year's annual wage negotiations, which could help shake off Japan's deflationary mindset. The BOJ will review its quarterly growth and inflation forecasts at the July 27-28 policy meeting. Reporting by Leika Kihara and Tetsushi Kajimoto; Editing by Muralikumar Anantharaman & Shri NavaratnamOur Standards: The Thomson Reuters Trust Principles.

The U.S. debt crisis is a headache for Japan, which is this year's G7 chair and the world's biggest holder of U.S. debt. Five more countries were invited to the outreach including Brazil, India and Indonesia - but not China - although emerging nations' debt problems will feature high on the agenda. On the other hand, Tokyo is courting China to join a creditor nations' meeting it initiated to resolve Sri Lanka's debt. "The agenda of talks show how G7 is becoming increasingly politicized in nature, with an emphasis on countering China." The International Monetary Fund last month trimmed its 2023 global growth outlook and warned a severe flare-up of financial system turmoil could slash output to near recessionary levels.

"Responding to such changes have become a common challenge for countries across the world, including Japan," he said, adding that the topic will be among many issues to be discussed at this week's G7 meeting. "We're watching the situation with a strong sense of alarm, as markets and economies are globally intertwined," he said, adding that Japan's banking system was stable as a whole. Japan would aim to issue a G7 joint communique after the finance leaders' meeting, which may stress the need for authorities to remain vigilant to banking-sector woes, two government sources with direct knowledge of the matter said. The Nikkei newspaper reported on Tuesday the G7 finance leaders will discuss setting up individual emergency plans in case they face digital bank runs. U.S. Treasury Secretary Janet Yellen, who will travel to Japan, will tell her G7 counterparts that the U.S. banking system remains sound, a senior Treasury official said on Friday.

But Ueda said the Bank of Japan (BOJ) must also avoid being too late in normalising monetary policy, a sign he will be more open to the idea of tweaking its controversial bond yield control policy than his dovish predecessor Haruhiko Kuroda. "If the BOJ suddenly realises that inflation will stably and sustainably hit 2% and decides to normalise monetary policy, it will have to make very big policy adjustments," Ueda said in an inaugural news conference on Monday. The dollar extended its gains against the yen to hit 133.055 , the highest since April 4, on receding expectations of a near-term tweak to Japan's ultra-loose monetary policy. PRICE TRENDS HOLD KEYIf the BOJ sees that it can achieve its price target, it might need to normalise monetary policy, Ueda said. But the BOJ must sustain Kuroda's stimulus programme for the time being, including YCC, remarks that diminish the chance of a policy shift at this month's policy meeting.

[1/3] New Governor of Bank of Japan Kazuo Ueda waits for Japanese Prime Minister Fumio Kishida before their meeting at prime minister?s official residence in Tokyo, Japan, April 10, 2023. "Given high economic uncertainty, the BOJ will communicate closely with the government and guide monetary policy flexibly," Ueda told reporters after meeting with Prime Minister Fumio Kishida to receive his official appointment letter. In parliamentary confirmation hearings in February, Ueda has stressed the need to keep ultra-easy policy to ensure Japan sustainably achieves the BOJ's 2% inflation target backed by wage growth. Ueda will chair his first policy meeting on April 27-28, when the board produces fresh quarterly growth and price forecasts extending through fiscal 2025. Ueda served as BOJ board member from 1998 to 2005, during which the central bank introduced zero interest rates and then quantitative easing to combat deflation and economic stagnation.

The service-sector mood, by contrast, recovered as easing border controls and an end to COVID-19 curbs heightened hopes for a rebound in tourism and consumption, the Bank of Japan's tankan survey showed. Takeshi Minami, chief economist at Norinchukin Research Institute, expects external factors, such as the fallout from U.S. and European monetary tightening, to weigh on Japan's exports and business sentiment. "Given the fragile nature of Japan's recovery, the BOJ is not in a situation where it can normalise monetary policy anytime soon," he said. Big firms plan to raise capital expenditure by 3.2% in the fiscal year that began in April, less than market forecasts for a 4.9% gain, the tankan showed. Reporting by Leika Kihara and Tetsushi Kajimoto; Editing by Sam HolmesOur Standards: The Thomson Reuters Trust Principles.

SummarySummary Companies C.banks responded to risk-aversive moves in markets - MatsunoJapan's banking system stable as a whole - MatsunoFinmin says will keep assessing impact of Credit Suisse buyoutMarket rout may complicate BOJ's exit path from easy policyTOKYO, March 20 (Reuters) - Japan's top government spokesperson said on Monday the banking system was stable, seeking to reassure markets the country won't see a contagion from U.S. and European banking sector woes. "Each country promptly ramped up efforts as risk-aversive moves were seen in financial markets," Matsuno told a regular news conference. "Japan's financial system is stable as a whole," he said, adding that authorities were watching financial market moves "with a strong sense of alarm". For now, financial authorities in Tokyo see the most likely risk for Japan coming from a deterioration in the U.S. economy that would hurt exports, rather than a direct bank contagion. "The failure of two U.S. banks spilled over to a Swiss bank in a seemingly unrelated way," one official said.

"Each country promptly ramped up efforts as risk-aversive moves were seen in financial markets," Matsuno told a regular news conference. "Japan's financial system is stable as a whole," he said, adding that authorities were watching financial market moves "with a strong sense of alarm". The remarks came after Finance Minister Shunichi Suzuki told reporters on Monday the government would continue to "carefully assess" how a weekend rescue deal for Credit Suisse Group would affect Japan's financial sector. For now, financial authorities in Tokyo see the most likely risk for Japan coming from a deterioration in the U.S. economy that would hurt exports, rather than a direct bank contagion. "The failure of two U.S. banks spilled over to a Swiss bank in a seemingly unrelated way," one official said.

SummarySummary Companies C.banks responded to risk-aversive moves in markets - MatsunoJapan's banking system stable as a whole - MatsunoGovt watching market moves with strong sense of alarm - MatsunoFinmin says will keep assessing impact of Credit Suisse buyoutTOKYO, March 20 (Reuters) - Japan's banking system is stable and the country will not see a contagion from U.S. and European banking sector woes, Chief Cabinet Secretary Hirokazu Matsuno said on Monday. "Each country promptly ramped up efforts as risk-aversive moves were seen in financial markets," Japan's top government spokesperson told a regular news conference. "Japan's financial system is stable as a whole," he said, adding that authorities were watching financial market moves "with a strong sense of alarm". The remarks came after Finance Minister Shunichi Suzuki told reporters on Monday the government would continue to "carefully assess" how a weekend rescue deal for Credit Suisse Group would affect Japan's financial sector. Reporting by Leika Kihara and Tetsushi Kajimoto; Editing by Tom Hogue and Jacqueline WongOur Standards: The Thomson Reuters Trust Principles.

Rather, it must come up with ideas" to mitigate the costs and help sustain stimulus, Uchida told an upper house confirmation hearing. The remarks follow those of incoming BOJ Governor Kazuo Ueda on Monday suggesting his preference to spend "plenty of time" if the central bank were to conduct a review of its policy framework. While stressing that it was premature to discuss an exit strategy from ultra-loose monetary policy, Uchida said any exit would involve adjustments in the BOJ's interest rate targets and the level of its balance sheet. "In what order and at what timing the BOJ will make these adjustments will depend on economic and financial developments at the time," Uchida said. The BOJ can tap its experience conducting ultra-loose policy and dealing with market forces, to ensure it can steer a smooth exit regardless of economic conditions at the time, he said.

TOKYO, Feb 28 (Reuters) - Incoming Bank of Japan (BOJ) Deputy Governor Shinichi Uchida said on Tuesday the central bank shouldn't modify its ultra-easy monetary policy just to address the side-effects of prolonged stimulus. It shouldn't modify easy policy just because there are side-effects. Rather, it must come up with ideas" to mitigate the costs and help sustain stimulus, Uchida told an upper house confirmation hearing. The remark follows that of incoming BOJ Governor Kazuo Ueda on Monday suggesting his preference to spend "plenty of time" if the central bank were to conduct a review of its policy framework. Markets are rife with speculation the BOJ will overhaul its bond yield control policy once Ueda succeeds incumbent Governor Haruhiko Kuroda, whose term ends in April.

The recent rise in Japan's consumer inflation is driven by cost-push factors rather than strong demand, warranting the BOJ to maintain ultra-loose policy, Ueda said. "There's still some distance for Japan to see inflation sustainably and stably meet the BOJ's 2% target," he told an upper house confirmation hearing. "Big improvements must be made in Japan's trend inflation for the BOJ to shift towards monetary tightening," Ueda said. "In guiding monetary policy, central banks must weigh the benefits and costs of each step," Ueda said. "There are various side-effects emerging, but the BOJ's current policy is necessary and appropriate" to achieve its 2% inflation target, he said.

Kazuo Ueda, a 71-year-old university professor who has kept a low profile despite strong credentials as a monetary policy expert, ticked some important boxes. While he was not even on the list of dark horse candidates floated by the media, Ueda was well known in global central bank circles. The bank's preferred choices were incumbent deputy governor Amamiya, as well as former deputies Hiroshi Nakaso and Hirohide Yamaguchi, given their deep knowledge on monetary policy. Matsuno said he hoped the BOJ works closely with the government and guides monetary policy flexibly, when asked whether Ueda's appointment could lead to a retreat from Abenomics. While he warned of the rising cost of the BOJ's yield control policy, Ueda has called for the need to keep monetary policy loose to ensure Japan stably achieves the bank's 2% inflation target.

[1/3] FILE PHOTO-A woman in a traditional costume makes her way at a shopping district in Tokyo, Japan November 15, 2022. "From a negative growth in July-September, the rebound isn't very impressive," said Toru Suehiro, chief economist at Daiwa Securities. But it's difficult to project a strong recovery partly due to pressure from rising inflation," he said. RECESSION RISKSFor the full year, the economy expanded 1.1% compared with a 2.1% increase in 2021, the data showed. Economy minister Shigeyuki Goto told reporters the economy was on course for a recovery as the pandemic's impact fades.

"This step will allow us to push down longer-term interest rates, without directly affecting supply and demand of the cash Japanese government bond (JGB) market," Kuroda told a news conference. Following its two-day policy meeting, the BOJ kept intact its yield curve control (YCC) targets, set at -0.1% for short-term interest rates and around 0% for the 10-year yield, by a unanimous vote. Reuters Graphics Reuters GraphicsThe central bank also made no change to its guidance that allows the 10-year bond yield to move 50 basis points either side of its 0% target. "By showing its resolve to use market tools more flexibly, the BOJ wanted to signal to markets it won't make big monetary policy changes under Kuroda." Market attention is already shifting toward monetary policy under Kuroda's successor, who will need to steer an orderly exit from decades of ultra-low rates.

The surprise decision sent the yen skidding against other currencies and bond yields tumbling the most in decades, as investors unwound bets they made anticipating the central bank would overhaul its yield control policy. At a two-day policy meeting, the BOJ kept intact its yield curve control (YCC) targets, set at -0.1% for short-term interest rates and around 0% for the 10-year yield, by a unanimous vote. The central bank also made no change to its guidance that allows the 10-year bond yield to move 50 basis points either side of its 0% target. Underscoring its resolve to keep defending the cap, the BOJ beefed up a key market operation tool to more effectively curb rises in long-term interest rates. "By showing its resolve to use market tools more flexibly, the BOJ wanted to signal to markets it won't make big monetary policy changes under Kuroda."

[1/2] A man walks at the headquarters of Bank of Japan in Tokyo, Japan, January 18, 2023. At a two-day policy meeting, the BOJ kept intact its yield curve control (YCC) targets, set at -0.1% for short-term interest rates and around 0% for the 10-year yield, by a unanimous vote. The central bank also made no change to its guidance that allows the 10-year bond yield to move 50 basis points either side of its 0% target. The decision to keep settings unchanged sent the dollar surging nearly 2% against the yen, its biggest one-day percentage jump since June 17. It also revised up the inflation forecast for fiscal 2024 to 1.8%, from 1.6% seen three months ago.

But she warned the outlook was "exceptionally" uncertain and dominated by risks, such as the fallout from Russia's war in Ukraine, global financial tightening and a slowdown in China's growth. But we need to rebuild and preserve buffers and be prepared to fully use our policy tool-kit," she told the same forum. The fallout from China's slowdown has been particularly painful in Asia, where factory activity slumped across the region in November. At the forum, Bank of Japan Governor Haruhiko Kuroda said he did not see a significant risk of Asia facing a sudden loss of confidence or a renewed financial crisis. "ASEAN policymakers must be vigilant" to risks and offer "clear, sufficient and timely communication to avoid unintended outcomes," he said.

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