--BOJ Hayami says shouldn't establish inflation targets
--Hayami: Monetary policy is sufficiently quantitatively eased
--Hayami says BOJ will watch for increasing deflation pressure
--BOJ's Hayami: Not mulling further easing for bad-debt issue

By Stephen Cannon, BridgeNews
Tokyo--Feb. 27--Bank of Japan Governor Masaru Hayami continued Tuesday to hold out against strong pressure to ease monetary policy further, saying he doesn't think Japan's central bank should establish inflation targets at present. Hayami also said "quantitative easing is a vague expression," and added "the Bank of Japan is already conducting sufficient quantitative easing and I want to continue to do so in the future."
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"We have made a guiding target for the overnight call rate and have set the official discount rate at an unprecedented ultra-low level: we are carrying out nearly all monetary easing policies," Hayami said in parliament.
Hayami also said BOJ measures such as resumption of outright purchases of short-term securities from the open market and adoption of a "Lombard-style" lending system will provide market players "peace of mind."
However, Hayami pointed out that even though the BOJ put these measures into place just over two weeks ago, the interest rate on three-month certificates of deposit and other three-month instruments in the money market was roughly 0.6% at the end of last year and is now around 0.4%.
Hayami also noted that since the BOJ's Feb. 9 decision to conduct outright purchases of short-term JGBs, it has made two such purchases totaling over 300 billion yen.
"So in this way we have sufficiently achieved the goal of quantitative easing. However, if the question is inflation targeting or outright purchases of long-term government bonds, I don't think we should conduct such a quantitative easing policy now," Hayami said.
Turning to the issue of disposing of bad debts in the financial sector, Hayami said that when financial institutions "use forcible means (to dispose of non-performing loans,) there is a decent chance that deflationary pressures may increase. We must watch price moves in the economy closely. It is the role of the central bank to adjust our policy accordingly in a timely fashion."
It's expected that as financial institutions increase direct disposal of bad debts liquidation of insolvent companies will increase. This, in turn, will then push up unemployment, which will then further stymie already stagnant personal consumption, which will push down private demand and possibly inflame deflationary pressures.
"I don't necessarily think that now is the time to loosen monetary policy on this issue, but I intend to watch (price) moves and stock market moves and make a correct monetary policy," Hayami said.
Hayami is scheduled to attend the Council of Economic and Fiscal Policy meeting Tuesday where he may face strong recommendations to further ease monetary policy from people such as Minister of Economy, Trade and Industry Takeo Hiranuma, who called for further easing in his Tuesday morning press conference.
The Bank of Japan is scheduled to have its policy board meeting Wednesday.