Highlights-Bank of Japan policy board April 8-9 minutes

(For more stories on Japan's economy click [ID:nECONJP])

TOKYO, May 23 (Reuters) - Bank of Japan policy board members agreed that downside risks to the global economy are heightening in light of unstable international financial markets and a flagging U.S. economy, minutes of their April 8-9 meeting showed on Friday.

The BOJ's nine-member board, which currently has only seven members, voted unanimously to keep its key overnight call rate target at 0.5 percent at the meeting. It also kept interest rates unchanged in subsequent meetings on April 30 and this week.

BOJ Governor Masaaki Shirakawa presided over the last day of the April 8-9 meeting, having attended a parliament hearing on April 8 on his appointment as permanent BOJ governor.

Following are some key points from the minutes:

MONETARY POLICY

-- One board member said it was inappropriate to predetermine the direction of future monetary policy, because uncertainty regarding future developments was considerable at present.

-- Some members said it was important to conduct money market operations flexibly and in a timely manner ... because global financial markets were still nervous, albeit less strained.

U.S., GLOBAL ECONOMY

-- The board members agreed that although overseas economies taken as a whole continued to expand, downside risks had increased as the disruptions in global financial markets had continued and growth in the U.S. economy had been sluggish.

-- They agreed that downside risks to the U.S. economy were growing.

-- Many board members said adjustments in the U.S. housing market were continuing as home prices were falling faster and housing starts and sales continued to decline.

-- A few board members said that from a longer-term perspective it should be borne in mind that the U.S. economy might grow more strongly than expected if adjustments in the housing market and financial markets went smoothly.

-- A few board members said attention should be paid to downside risks to the European economies, particularly the impact of disruptions in global financial markets and tightening of financial institutions' lending standards.

-- The board members agreed that there were upside risks to global price developments in light of rising commodity prices, particularly in crude oil.

DOMESTIC ECONOMY, PRICES

-- A few board members said the pace of growth of Japan's exports might slow in the future as global economic growth was likely to decelerate.

-- The board members agreed that the pace of increase in companies' capital investment has slowed as corporate profits have been levelling off due mainly to higher energy and material costs.

-- They also agreed that businesses' capital spending was likely to remain firm but increase at a slower pace.

-- The board members agreed that production has been more or less flat recently, partly in reaction to the relatively large increase in the second half of 2007.

-- A few members said adjustment in production is unlikely to be severe, given that inventories have been more or less in balance with shipments.

-- The board members agreed that housing investment remained at a low level, although there were signs of recovery.

-- Some board members said consumers' inflation expectations were increasing, reflecting the ongoing rise in the prices of daily necessities. (Reporting by Yuzo Saeki, Editing by Michael Watson)