BOJ's Suda hints at policy change

KOCHI (Kyodo) The Bank of Japan may lift its quantitative monetary easing policy by the end of the fiscal year, a BOJ Policy Board member indicated Wednesday.

Miyako Suda was speaking at a news conference in Kochi after giving a speech.

Referring to the possibility that the policy would be terminated by March 31, she said, "My answer is that such a thing may happen or may not happen."

Observers see Suda's comments as a step toward scrapping the policy, as she is now the first person to concede that a specific time frame is possible for a monetary policy shift.

Her remarks came amid growing speculation that the central bank may abandon its quantitative easing policy sometime in 2006 as the economy is showing signs of sustainable recovery and consumer price falls are shrinking.

Japanese government bond prices fell sharply Wednesday afternoon following the comments.

Several BOJ Policy Board members, including Deputy BOJ Gov. Kazumasa Iwata, have recently touched on the end of the ultra-loose policy -- a major selling factor in the bond market -- in speeches and news conferences.

Among the nine Policy Board members, Suda is considered "hawkish," meaning she is inclined to favor an early termination of the unconventional policy.

Market players are focusing on what BOJ Gov. Toshihiko Fukui will say about the prospects of a policy shift when he gives a speech at a business forum in Osaka on Thursday and holds a news conference that evening.

In her speech Wednesday, Suda said, "I think the time for terminating the quantitative easing policy is nearing," citing smaller falls in consumer prices.

Suda also said she will focus on whether changes in the nationwide consumer price index from a year before "stabilize above zero" when making her recommendations on the timing for changing the policy.

The central bank has pledged to maintain the ultra-loose policy, introduced in March 2001, until the percentage change in the core nationwide consumer price index stabilizes above zero from the previous year.

The core nationwide CPI fell 0.2 percent in July from the prior year.

The government will release the August data on Friday, and the CPI is forecast to fall 0.1 percent. Many analysts project the index to rise slightly in October at the earliest, but some say surging crude oil prices may help the key gauge rise earlier than generally expected.