* Will take more than 2 yrs to meet price goal-Shirai
* Adds must be mindful of downside risks
* Must watch impact of 2015 tax hike to see if price goal
* BOJ shouldn't be wedded to 2-yr timeframe for price goal
(Adds quotes from news conference)
By Leika Kihara
NAHA, Japan, May 29 Bank of Japan board member
Sayuri Shirai said that aggressive monetary stimulus should
remain in place well into 2016 as it would take longer than the
central bank's two-year timeframe to achieve its price target.
The former International Monetary Fund economist said the
BOJ should not be adamant about meeting the two-year timeframe,
set last April when its massive stimulus was put in place, at
the risk of creating excessive distortions in the economy.
Her views contrast with Governor Haruhiko Kuroda's repeated
assurances that Japan is on track to meet the bank's 2 percent
inflation goal sometime next year, and expose differences within
the board on how long it may take to hit the target.
"We shouldn't think that we must achieve 2 percent inflation
strictly in two years at whatever cost," she told a news
conference on Thursday after meeting with business leaders in
Naha, capital of the southernmost Japanese prefecture of
"What's most important is to ensure that 2 percent inflation
is maintained in a stable manner," said Shirai, among the most
dovish policymakers in the nine-member board.
QQE HERE TO STAY
Under the stimulus launched in April last year, the BOJ
pledged to double base money via aggressive asset purchases to
accelerate inflation to 2 percent in roughly two years.
Kuroda has repeatedly stressed his conviction that Japan can
achieve the price target within two years, although some on the
board agree with private-sector analysts that the timeframe is
too ambitious for a country only just emerging from deflation.
In its half-year projections issued last month, the BOJ said
it now expects to achieve the price target during fiscal 2015,
which ends in March 2016.
But Shirai said it will take until fiscal 2016 for consumer
inflation to reach 2 percent, because households and companies
will need time to adjust to price rises after 15 years of
She was also more pessistic about the economic outlook than
other board members, saying there were risks to the outlook.
There was also a risk household spending may lose momentum
if wages don't increase enough to make up for the rising cost of
living from inflation, and a two-stage increase in the sales tax
hike, Shirai said.
The first tax hike -- from 5 percent to 8 percent -- was put
in place in April with the second one due in October 2015,
provided the government feels the economic situation would be
stable enough to proceed.
Shirai said the BOJ must scrutinise how the second sales
tax hike will affect the economy in judging whether the BOJ's
price target is achieved, suggesting that QQE should be
maintained at least until fiscal 2016.
Kuroda has stressed that QQE is an "open-ended" programme
that will be maintained until the inflation goal is achieved in
a stable manner, but has declined to say specifically how long
the stimulus will remain in place.
Some in the board feel the extraordinary stimulus programme
shouldn't be maintained for too long because doing so will make
exiting the policy more difficult.
(Editing by Eric Meijer)