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BOJ's Masai: Worried about market shocks due to global uncertainty

By Stanley White

By Stanley White

SAITAMA, Japan (Reuters) - The election of Donald Trump as U.S. President, Brexit, and the weak state of the European Union's financial sector have been named by Bank of Japan board member Takako Masai as possible causes of future global economic weakness and wild financial market swings.

Masai said in a speech for business leaders in Saitama there is uncertainty about the economic policies that Trump will pursue. She also expressed concern that uncertainty about overseas economies could hurt sentiment in Japan.

"I am particularly worried about sudden changes in financial markets given the backdrop of rising uncertainty about the global economy," Masai said, according to the speech text.


"This could have a negative impact on already sluggish sentiment. It is important for the BOJ to manage policy so it doesn't become an unnecessary source of volatility."

This is a delicate time for the BOJ because Trump's win has sparked a global sell-off in bonds, which is testing the BOJ's ability to contain gains in yields under its new policy framework.

In September, the BOJ last switched its policy target to interest rates from expanding the monetary base.

Its main policy tools are the negative 0.1 percent interest rate it charges on a small portion of commercial bank reserves and debt purchases to keep 10-year yields around zero.

The policy has caused some confusion because traders are not sure how far the BOJ is willing to let 10-year yields rise or fall.

(Reporting by Stanley White; Editing by Chang-Ran Kim)