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UPDATE: BOJ October Minutes Show No Change In Easy Monetary Stance

(Adds more quotes from the minutes plus background.)

By Megumi Fujikawa

Of DOW JONES NEWSWIRES

TOKYO -(Dow Jones)- Bank of Japan policy board members felt the need to patiently keep the current extremely accommodative monetary conditions in place, but by early October were already leaning toward ending little-used emergency funding measures, minutes released by the central bank showed Thursday.

"Many members said that, regardless of the manner of dealing with temporary measures, it was most important that the central bank clearly explain its basic policy stance of steadily implementing measures to maintain the accommodative financial environment," the summary of the Oct. 13-14 meeting showed.

The minutes likely add to the view that the BOJ will keep its policy target rate unchanged at an ultra-low 0.1% for the foreseeable future, as the central bank forecasts downward pressure on prices to continue for the time being, and as it expects the pace of economic recovery at home and abroad to remain slow.

The BOJ, at that meeting, kept interest rates on hold, and contrary to expectations, made no mention of whether it would terminate emergency fund provision measures at the end of December as planned.

But at a second meeting for the month on Oct. 30, the policy board voted to end outright buying of commercial paper and corporate bonds on Dec. 31, as scheduled. It also voted to terminate a special lending facility to provide three-month funds at 0.1% at the end of March--three months later than the planned expiry.

Indeed, most board members had already seen less importance in continuing those emergency programs by the first October meeting, as they thought the nation's financial environment was "increasingly showing signs of improvement."

The minutes showed many members said "the recent decrease in the bidding amount in the bank's outright purchases of CP and corporate bonds had reflected the improvement in market functioning, suggesting that the temporary measures' contribution to the improvement in market conditions was on the wane."

Many members also said effects of such measures were "overly strong in some aspects," pointing out that issuance rates for some highly-rated CP have been lower than yields on the government bills.

Still, one member opposed such views, saying the corporate bond market remained unstable and that the BOJ's outright buying program made "a significant contribution to securing market stability."

On Oct. 30, board member Atsushi Mizuno voted against terminating corporate debt buying in December and the special lending facility in March.

-By Megumi Fujikawa, Dow Jones Newswires; 813-6895-7559; megumi.fujikawa@ dowjones.com

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  11-04-092047ET
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