* Board member says taken steps needed to meet inflation
* Japan monetary policy could draw attention at G20
* Inflation forecasts expected to be revised next week
By Stanley White
GIFU, Japan, April 18 The Bank of Japan knows
there are risks associated with its massive stimulus plan but
they were outweighed by the need to act decisively to end 15
years of nagging deflation, policy board member Ryuzo Miyao said
Those risks include the expansion of the central bank's
balance sheet, how it will unwind the quantitative easing, and
that the ultra-easy conditions could provoke excessive
risk-taking by investors.
"I personally feel that the steps we have taken are
necessary to meet our price target at the earliest possible
moment," Miyao said, according to the text of a speech he gave
in the central city of Gifu.
"Considering that Japan has been in deflation for such a
long time, even if there are some risks, I will support our
policies as long as the benefits outweigh the costs."
The BOJ stunned global financial markets two weeks ago by
committing to open-ended asset buying to nearly double the
monetary base to 270 trillion yen ($2.7 trillion) by the end of
2014, looking to end two decades of stagnation and lift
inflation to 2 percent.
The BOJ's intense stimulus could be a focal point at a Group
of 20 meeting in Washington this week, and investors will look
for any signs of unease at how the BOJ's money printing will
impact currencies and other markets.
As part of its stimulus, the BOJ will buy 7.5 trillion yen
of long-term government bonds per month, roughly 70 percent of
new debt. That has caused yields to rise due to worries that
institutional investors would be crowded out of the market.
Miyao said the BOJ would be flexible in its market
operations to ensure bond yields fell across the curve and
short-term rates remained very low.
He later told reporters the big swings in the bond market
this month reflected adjustments to supply and demand and were
likely to be temporary.
"It is important for the BOJ to closely communicate with
market participants and consider if it needs to take steps to
ensure smooth market operations," Miyao said.
A BOJ official said on Wednesday the central bank would
consider increasing the frequency of long-term debt purchases,
which would reduce the amount of each purchase and ease bond
dealers' worries about market volatility.
The BOJ is due to update its forecasts at its next policy
meeting on April 26, and markets will be looking closely at
whether new Governor Haruhiko Kuroda's two-year timeframe for
the 2 percent inflation target becomes an official projection.
The Nikkei newspaper reported on Thursday the central bank
could forecast inflation would reach 2 percent by the spring of
2015, consistent with Kuroda's view although seen by many
private-sector economists as too ambitious.
The unsourced Nikkei report said the BOJ was likely to raise
its inflation forecast for the 2103 fiscal year, which began on
April 1, to between 0.5 percent and 1 percent from 0.4 percent,
and raise its fiscal 2014 forecast to around 1.5 percent.
For his part, Miyao said consumer prices in fiscal 2014
would rise more than 1 percent, higher than BOJ board members'
current median forecast of 0.9 percent.
Helping lift inflation to 2 percent would be further yen
weakness -- it already hit four-year lows near 100 per dollar
this month -- as Treasury yields rise in response to faster U.S.
economic growth and the BOJ's easing, he said.
The U.S. growth and stabilisation in other economies would
help Japan's exports and boost production, he said. In turn,
that should see capital expenditure pick up, and the investment
in new equipment would lift productivity.
Rising inflation expectations as the economy improved would
also help meet the target, he said.