September 3, 2015 / 3:14 AM / 4 years ago

UPDATE 2-BOJ's Kiuchi warns Japan won't hit inflation goal even by early 2018

* China slowdown already hurting Japan's recovery - BOJ
    * Adds China unlikely to trigger global financial crisis
    * Weak exports, consumption to weigh on Japan recovery
    * Kiuchi maintains view BOJ should taper asset purchases

 (Adds quotes from news conference)
    By Leika Kihara
    AOMORI, Japan, Sept 3 (Reuters) - Japan is unlikely to see
inflation hit the central bank's 2 percent target over the next
2-1/2 years, Bank of Japan board member Takahide Kiuchi said,
warning that China's slowdown has become a huge risk to global
    The former market economist said inflation has been dampened
by weak consumer confidence and faltering exports as China's
growth engine sputters.
    Kuichi, however, dismissed the chance that problems in China
could trigger a global financial crisis.
    "With China's property market showing signs of a pick-up and
authorities showing readiness to take policy measures, I expect
the economy to stabilise over the course of time," he told
reporters on Thursday after meeting with business leaders in
Aomori, northern Japan.
    Kiuchi - among those in the nine-member board wary of the
rising costs of the BOJ's radical stimulus - stuck to his lone
proposal to taper the bank's asset purchases and allow itself
more time to hit its 2 percent price target.
    "Consumer inflation ... is unlikely to reach 2 percent even
in fiscal 2017" ending in March 2018, Kiuchi said.
    "I think the price target of 2 percent is well above the
level consistent with Japan's current growth potential," he
said, adding that it was difficult to hit the price target
unless the BOJ's efforts were accompanied by structural reforms
to boost the country's productivity.
    While acknowledging that Japan's economy was in a lull,
Kiuchi said he was against expanding stimulus further given the
limited effect it would have on boosting growth.
    "Focusing too narrowly on pushing up prices doesn't make
sense," he said.
    The world's third-biggest economy slipped into a contraction
in April-June and inflation has ground to a halt, keeping the
BOJ under pressure to expand stimulus to meet its pledge to
accelerate inflation to 2 percent by around September next year.
    BOJ Governor Haruhiko Kuroda has voiced confidence that
Japan is on track to hit the price target. But some board
members, including Kiuchi, share doubts held by private analysts
on whether the ambitious target can be met so soon and with
monetary stimulus alone.
    Kiuchi has been the lone board member to advocate tapering
the BOJ's massive asset purchases on concern the cost of the
programme, such as drying up bond market liquidity, was already
exceeding the benefits. He was among the four board members who
voted against the BOJ's decision last October to ease policy.

 (Reporting by Leika Kihara; Editing by Chris Gallagher & Shri
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