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Muto says Bank of Japan to raise rates when it sees need to act - report

Tue, Nov 21 2006, 06:49 GMT
http://www.afxnews.com

TOKYO (XFN-ASIA) - The Bank of Japan would carry out an additional interest rate hike once it confirms a need to act, BoJ deputy governor Toshiro Muto said in an interview with Jiji Press.

Muto said the BoJ will closely examine economic and price conditions, and make a policy decision at a timing that is not too early or not too late, though he did not specify exactly what the central bank would consider to confirm a need to act.
He did, however, repeat that the central bank does not have a predetermined schedule for the next interest rate hike, which, the report said, indicated that the BoJ remains open on whether it should carry out a rate hike at its next monetary policy meeting on Dec 18-19.

The BoJ raised its key interest rate target to around 0.25 pct in July upon its exit from the zero interest rate policy, and has since been guiding the rate to that level.

In the Jiji report, Muto said the BoJ will adjust interest rates gradually if the Japanese economy appears certain to experience a sustained period of expansion in line with the bank's forecast offered in its latest semi-annual economic and price outlook report released in late October.

Japan's core consumer price index, excluding fresh food prices, is expected to remain on an uptrend also in line with the BoJ's projection shown in the report, he said, while noting that a rapid rise in the CPI is unlikely.

Referring to recent weak data on personal spending and income, Muto noted that a spillover of benefits from the country's upbeat corporate sector to the household sector has been somewhat slower than previously expected.
Muto also expressed concern about the US economy, the report said.

The world's biggest economy may decelerate depending on the course of the country's housing market and close attention is necessary for the market's possible large adjustment, he added.
But he said that the US economy is likely to achieve a soft landing because employment is increasing and this year's Christmas shopping season is seen relatively solid.

Meanwhile, Muto cited uncertainty reflecting a rise in inflation expectations in the United States on the back of an energy market boom.
mni/mas