HIGHLIGHTS 2-BOJ's Shirakawa: see signs of sustainable recovery

TOKYO, April 7 (Reuters) - Bank of Japan Governor Masaaki Shirakawa said on Wednesday that the sustainability of Japan's economic pickup was becoming clearer.

Following are key quotes from Shirakawa's news conference:



ECONOMY

'We confirmed that the economy is largely in line with or a little overshooting our scenario. We'd like to decide whether to upgrade our assessment in our outlook report (due on April 30).

'The sustainability of a pickup in the economy has become clearer and the risk of a double-dip recession as was worried about at one time has largely receded ...

'There are some signs of a sustained recovery in Japan's economy ahead ...

'Corporate profits are steadily improving and capital spending has stopped falling. Given the improvement in corporate profits and a pickup in the world economy, capital spending is likely to increase ahead.'

'The March tankan confirmed that corporate sentiment has continued improving and the improvement is broadening ...

'Financial conditions have improved further from last month and are showing increasing signs of easing although some severity remains.

'Due partly to the effects of BOJ policy, term interest rates have declined and corporate funding costs have continued to fall ... The March tankan showed that corporate financial conditions have continued to ease as a whole.

'Looking at trends over the past few months, the worsening of the job market has clearly come to a halt.'



MONETARY POLICY

'It is very important to discuss whether maintaining monetary easing for a long time causes imbalances in the economy and such imbalances to accumulate, leading to a big shock ...

'We guide monetary policy by examining the economy's imbalances.

'I do not get the impression that yen carry trades are growing in a major way.'



FISCAL POLICY

'The sustainability of public finance is important for the stability of the economy and financial system, and keeping this in mind is important when reforming public finance.

'There is no direct link between fiscal and monetary policies. We guide monetary policy by paying attention to how the economy appears.'



PRICES

'Improvements in the supply-demand balance are likely to cause falls in consumer prices to narrow, though there may be a time lag. Companies' views on retail prices are likely to improve gradually.

'The economy is moving in a positive direction so the supply-demand balance in theory is improving. We'll discuss the degree of improvement in the next monetary policy meeting.'



JAPAN POST REFORM

'It is important to pay attention to the impact on the financial system when reforming Japan Post ... Debate is needed on whether its size is appropriate and how to ensure fair competition with private-sector firms.'

(Reporting by Leika Kihara, Rie Ishiguro and Tetsushi Kajimoto)

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