BOJ can decide when to alter policy-Japan's Yosano

TOKYO, Feb 26 (Reuters) Japanese Economics Minister Kaoru Yosano said on Sunday it was up to the Bank of Japan to decide when the time was ripe to end its ultra-easy monetary policy.

Recent slight rises in consumer prices -- a key benchmark for monetary policy -- and hawkish comments by central bankers have bolstered speculation in financial markets that the BOJ could end its so-called ''quantitative easing'' policy around April.

Some ruling party lawmakers and government officials have warned against any hasty move by the central bank, but others, encouraged by signs of a steady economic recovery, have recently become less hostile to a shift as long as interest rates are kept near zero.

Yosano, who has been more accepting of the BOJ's independence on monetary policy than others, said that although deflation remained, it was not as serious as in the past.

''The BOJ has clearly stated that it will end the policy once its three conditions are met. So once those three conditions are met, I think the BOJ should feel free to do so in any way, on its own judgment,'' Yosano said on an NHK television programme.

The BOJ has said it would stick to quantitative easing -- which involves supplying the banking system with excess funds and pinning interest rates near zero -- until annual changes in the core consumer price index (CPI) stablise above zero percent.

In addition, it needs to be convinced that consumer price changes will not fall back below zero and that the economy in general is ready for a policy shift.

Core CPI rose 0.1 percent in December, the second straight increase after a flat reading in October. Economists expect it to be up 0.4 percent in January from a year earlier.

BOJ Governor Toshihiko Fukui has recently been sending signals about a near-term policy shift, followed by higher interest rates later in the year. His hawkish comments sent short-term Japanese bond yields to five-year highs and the yen to a one-month peak against the dollar on Friday.

ECONOMIC VIEWS MERGE Asked whether conditions for a BOJ policy shift were falling into place, Yosano said: ''I think there is no big difference over views on the economic outlook between the government and the BOJ.'' ''Matching our views on the economy is important for monetary policy. So having little difference on the issue is a big factor.'' After data showing real economic growth of 1.4 percent in October-December from the previous quarter, the government upgraded its view on the economy last Wednesday for the first time in six months, saying it was recovering more strongly due to firmer exports and industrial production.

Its economic assessment is in line with that of the BOJ.

''The economic recovery this time is sustainable,'' Yosano said.

He also said the BOJ's quantitative easing and zero interest rate policy were unprecedented in the world and abnormal.

Japan's economy had two big challenges as it recovered, he added -- ''normalising'' monetary policy and fiscal conditions.

Speaking on a separate television programme, Internal Affairs Minister Heizo Takenaka, who is Yosano's predecessor and an architect of Prime Minister Junichiro Koizumi's reform programme, reiterated his call for the BOJ to set a price target that would be decided jointly with the government.

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