*
BOJ may learn from Fed, ECB if to conduct policy review -
Uchida
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Fed, ECB spent 1-1.5 years in policy review - Uchida
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BOJ must maintain easy policy despite costs - Himino
(Adds quotes from deputy nominee Himino)
By Leika Kihara and Tetsushi Kajimoto
TOKYO, Feb 28 (Reuters) - Incoming Bank of Japan (BOJ)
Deputy Governor Shinichi Uchida on Tuesday brushed aside the
chance of an immediate overhaul of ultra-loose monetary policy,
suggesting that any review of its policy framework could take
about a year.
Uchida, a career central banker, said the BOJ should not
modify its ultra-easy policy just to address the side-effects of
prolonged stimulus such as market distortions caused by the
bank's heavy intervention to defend its yield cap.
"The BOJ must maintain monetary easing. 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.
If the BOJ were to conduct a comprehensive review of its
policy framework, it could take one to one-and-a-half years if
the experience of U.S. and European counterparts is anything to
by, Uchida said.
"Any such special type of examination is better done by
taking a wide perspective looking at various factors," he added.
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.
With inflation exceeding its 2% target, markets are rife
with speculation the BOJ will overhaul its yield curve control
(YCC) policy once Ueda succeeds incumbent Governor Haruhiko
Kuroda, whose term ends in April.
BOJ board member Naoki Tamura has openly called for the
central bank to conduct a review of its 2% inflation target and
its ultra-loose policy, in light of criticism that prolonged low
rates were hurting financial institutions' margins and
distorting the shape of the yield curve.
Earlier this month, the government named Uchida and Ryozo
Himino, former head of Japan's banking sector watchdog, to
become next BOJ deputy governors when the incumbents' terms end
in March.
Under YCC, the BOJ guides short-term rates at -0.1% and
the 10-year bond yield around 0% with an implicit ceiling of
0.5% to reflate growth and fire up inflation to its 2% target.
"It's true negative rates have hurt financial
institutions' profits," Himino told the same confirmation
hearing.
"While mindful of the impact on bank profits, it's
important to support the economy with accommodative policy now
to create an environment where companies can boost wages," he
said.
While the BOJ needs to strategise ideas of an exit based on
various economic scenarios, it can only debate specifics of the
plan when sustained achievement of its 2% inflation target is
foreseen, Himino said.
The BOJ has been forced to ramp up bond buying to defend its
0.5% cap set for the 10-year bond yield under YCC, leading some
market players to bet it will tweak or abandon the policy soon.
BNP Paribas chief Japan economist Ryutaro Kono, for one, has
predicted the BOJ could raise the yield cap at its next meeting
in March, to allow bond yields to move more flexibly.
The BOJ on Tuesday offered 1 trillion yen ($7.34 billion) in
five-year loans against collateral to banks, as part of efforts
to defend its 0.5% yield cap.
The deputy governor nominations need the approval of the
upper and lower houses of the Diet, which are effectively done
deals as the ruling coalition holds solid majorities in both.
($1 = 136.3100 yen)
(Reporting by Leika Kihara and Tetsushi Kajimoto; Editing by
Jacqueline Wong and Sam Holmes)
