* Japan still distant from limits of monetary easing-Harada
* Adds bank lending will rise if deflation eradicated
* BOJ can cut rates, buy more assets - Harada
(Adds quotes, detail)
By Leika Kihara
MATSUMOTO, Japan, Oct 12 Bank of Japan board
member Yutaka Harada said on Wednesday the central bank should
not hesitate to expand monetary stimulus if global economic
shocks hamper achievement of its price target.
Harada shrugged off the view that the BOJ had exhausted its
policy ammunition to reflate the economy, stressing it still had
room to cut interest rates, increase asset purchases or
accelerate the pace of money printing.
"Japan is quite distant from reaching the limits of monetary
easing," Harada said in a speech to business leaders in the
central Japan prefecture of Nagano.
The BOJ last month switched its policy to target interest
rates and away from expanding the monetary base - or the pace of
money printing - after years of massive asset purchases failed
to jolt the economy out of decades-long stagnation.
Under a new "yield curve control" framework, the BOJ pledged
to keep the 10-year bond yield around zero percent. It also
maintained a policy of charging 0.1 percent interest on a
portion of excess reserves financial institutions park with the
Harada rejected criticism that negative interest rates were
counter-productive because they hurt bank profits and
discouraged them from boosting lending, saying that bank lending
would increase if the BOJ's monetary easing ended deflation.
"If deflation ends, companies will resume spending and
demand for bank lending will increase," Harada said. "Under
current circumstances, I don't think negative rates would hurt
bank profits enough to have an adverse impact on the economy."
Harada noted that the BOJ's holdings of government bonds
comprised just 30 percent of Japan's public debt, leaving room
for additional purchases by the central bank.
"The BOJ shouldn't hesitate to ease policy if achievement
(of its price target) is hampered by sudden changes in the
global economy," Harada said.
Harada, a former academic, has been a vocal advocate of
aggressive central bank money printing to reflate the economy,
but also voted for the BOJ's decision last month to shift the
bank's policy focus to interest rates from the pace of money
(Reporting by Leika Kihara; Editing by Chris Gallagher and Eric