BOJ board newcomer Masai warns against excess FX volatility

By Leika Kihara and Stanley White

TOKYO (Reuters) – The Bank of Japan’s new board member, Takako Masai, said on Thursday excessive currency moves that do not reflect economic fundamentals are undesirable.

“Excess volatility in currency markets risks hurting companies’ investment activity,” Masai said at her inaugural news conference.

But she sidestepped questions on whether additional monetary easing could stave off unwelcome yen gains, or whether the cost of the central bank’s radical stimulus program was exceeding the merits.

“In a highly globalized world, it’s difficult to judge (the outlook for Japan’s economy and prices) based on domestic policy moves alone,” Masai said.

Parliament in May approved the government’s nomination of Masai, a former commercial bank executive with expertise in currency markets, to join the nine-member board, succeeding Koji Ishida.

She joins at a time the central bank is struggling to prevent external headwinds from derailing Japan’s fragile economic recovery, and its policy options are dwindling.

Many analysts say Masai is unlikely to rock the boat and is seen voting in favor of BOJ Governor Haruhiko Kuroda’s proposals, unlike her predecessor Ishida, who dissented to January’s decision to adopt negative interest rates.

Masai warned that uncertainties were heightening over the global economy, such as the future pace of U.S. interest rate hikes and market turmoil caused by Britain’s vote last week to leave the European Union.

“If such uncertainties persist and lead to downgrades in global growth, we need to give utmost attention to how that affects Japan’s economy as well as corporate and household sentiment,” she said.

With inflation distant from its 2 percent target and a strong yen hurting exports, the BOJ is under pressure to expand monetary stimulus as early as July to support growth.

But many analysts say the BOJ is running out of ammunition with its aggressive purchases drying up bond market liquidity and its decision in January to adopt negative interest rates proving deeply unpopular among the public.

(Reporting by Leika Kihara and Stanley White; Editing by Chris Gallagher and Richard Borsuk)