* BOJ has room to deepen rates, boost asset buying-Kuroda
* Adds new ideas should not be off the table
* Kuroda admits negative rates may hurt sentiment
(Adds quotes, details)
By Leika Kihara
TOKYO, Sept 5 Bank of Japan Governor Haruhiko
Kuroda signalled his readiness to ease monetary policy further
using existing or new tools, shrugging off growing market
concerns that the bank is reaching its limits after an already
massive stimulus programme.
He also stressed the BOJ's comprehensive assessment of its
policies later this month won't lead to a withdrawal of easing.
But Kuroda acknowledged that the BOJ's negative interest
rate policy may impair financial intermediation and hurt public
confidence in Japan's banking system, a sign the central bank is
becoming more mindful of the rising cost of its stimulus.
"Even within the current framework, there is ample room for
further monetary easing ... and other new ideas should not be
off the table," Kuroda told a seminar on Monday.
"There may be a situation where drastic measures are
warranted even though they could entail costs," he said, adding
that the BOJ should "always prepare policy options."
Under its current framework that combines negative rates
with hefty buying of government bonds and some riskier assets,
the BOJ has gobbled up a third of Japan's bond market and faced
criticism from banks for squeezing already thin profit margins.
Sources have told Reuters the BOJ will consider making some
modifications to its policy framework and debate some of the
unintended consequences of its ultra-loose policy.
For the first time, Kuroda publicly acknowledged that
negative rates could dampen public sentiment by hurting banks'
profits and the rate of returns on pension investments.
But he said monetary policy has yet to reach its limit,
stressing that the BOJ had room to deepen negative rates.
"There is no free lunch for any policy. That said, we should
not hesitate to go ahead with (additional easing) as long as it
is necessary for Japan's economy as a whole."
The BOJ eased policy in July and pledged to conduct a
comprehensive assessment of the effects of its stimulus
programme at this month's rate review.
Most analysts expect the BOJ to ease further this month,
with economic growth having ground to a halt and inflation
sliding further away from its 2 percent target.
"Kuroda's message is that the BOJ would at least keep the
option of deepening negative rates in case the yen spikes
suddenly. But that doesn't mean it would take such a step
anytime soon given concerns about the costs," said Yasunari
Ueno, chief market economist at Mizuho Securities.
"As for the next step, I expect the BOJ to ease either by
cutting rates or boosting quantitative easing, or a combination
Facing stubbornly weak prices, the BOJ has pushed back the
timing of its inflation goal several times since it implemented
aggressive policy easing measures in 2013 under Kuroda.
(Additional reporting by Stanley White and Tetsushi Kajimoto;
Editing by Chris Gallagher and Kim Coghill)