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Deputy Governor Nakaso: BoJ to adopt further easing if needed

Bank of Japan's deputy governor warned of lingering global economic uncertainty, pointing to the signs of weakness in private consumption signaling the central bank's readiness to expand monetary stimulus if needed to hit its inflation target.

Nakaso said Japan's economy is expected to expand moderately and he expects two percent inflation target to be achieved in fiscal 2017/18. He further added that it takes some time for the effect of monetary policy to appear in an economy and there is absolutely no change in BoJ's commitment to attain the target of two percent inflation. He also said BoJ will take appropriate steps, if needed, to hit price goal and he mentioned that no easing in April does not imply that no further action will be taken, he added.

Bold easing is necessary to put the economy on track for sustainable growth and some indicators suggest a fall in bond market liquidity since the start of the year, he added.

In addition, Bank of Japan's Governor Haruhiko Kuroda will make a decision on stimulus on June 16 and the Federal Open Market Committee (FOMC) gathering scheduled for June 14-15. The UK decision on whether to remain in the European Union on June 23 is also weighing on investor sentiments.

Meanwhile, investors remained cautious as Japanese equities slide after yen advanced ahead of BOJ and Fed policy meetings, scheduled next week.

However, critics feel the Japanese government bond (JGB) market no longer properly reflects investors' economic and inflation expectations because the BOJ is distorting market functions with negative rates and massive bond purchases.

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