BOJ member mum on whether it will buy shares on gov't request+

NAHA, Japan, Feb. 26 Kyodo -
A member of the Bank of Japan's Policy Board refrained Thursday from clarifying
whether the central bank will buy shares, amid growing speculation that the BOJ
may join the government's effort to prop up the nation's ailing stock markets.
Tadao Noda told reporters in Okinawa Prefecture that it is too early to judge
what action the central bank can take as the government has yet to unveil the
details of its initiative to prevent falling equity prices from having a
further negative impact on the already flagging economy.
While the government is reportedly set to request that the BOJ buy
exchange-traded funds, a type of investment fund linked to average stock
prices, Noda said, ''We are not in a situation where we can say whether it is
possible or impossible.''
On the currency market, where the yen has recently plunged against the U.S.
dollar and other major currencies, Noda said it would be desirable for foreign
exchange rates to remain stable, adding, ''Recent fluctuations have been a bit
volatile.''
The yen has dropped against the dollar to a level not seen for three months.
At a meeting with local business leaders in Japan's southernmost prefecture
earlier in the day, Noda said central banks should refrain from too much
intervention, even to battle against the current global credit turmoil, warning
that their excessive involvement in financial markets could cause dysfunction.
His remarks came as the BOJ has implemented a series of emergency policy
measures to ensure liquidity in money markets and facilitate corporate
financing amid the worldwide credit crunch.
The BOJ must ''choose optimal policies and underpin the Japanese economy by
keeping credit conditions well eased,'' Noda told the business leaders. But he
also said if the bank ''intervenes (in markets) too much, it might only create
a wag-the-dog scenario by impairing the functioning'' of the markets.
Under its current unconventional policy, the BOJ has temporarily introduced
outright purchases of corporate bonds and commercial paper, or short-term debt
issued by companies, from financial institutions to encourage them to lend more
to businesses, even in the face of the credit crisis.
However, Noda denied that markets will benefit from increased BOJ purchases of
corporate debt.
The board member suggested that the BOJ would not hesitate to terminate its
emergency policy measures as soon as the markets showed signs of an improvement
in their functioning.
==Kyodo
2009-02-26 22:35:01