BOJ's Kuroda blames stock rout on heightening global uncertainty

By Leika Kihara

TOKYO (Reuters) - Bank of Japan Governor Haruhiko Kuroda blamed recent instability in stock markets on growing global economic uncertainties, but said the world's third-largest economy was resilient enough to withstand any external shocks.

Conceding that it was taking longer than expected to achieve his 2 percent inflation target, Kuroda said policy makers needed to be vigilant to heightening external risks such as protectionism and slowing growth in China.

"Japan's economy is likely to continue expanding moderately. But it's necessary to bear in mind that uncertainties have recently increased with respect to developments in overseas economies," Kuroda said on Wednesday.

"The stock market has been somewhat unstable. The fluctuations are partly attributable to changes in perception of various risks surrounding the global economy," he in a speech to an annual meeting of Japan's business lobby Keidanren.

Kuroda, however, said Japanese and global economies are "resilient enough to endure any shock" thanks to solid U.S. economic growth and efforts by companies to boost profitability.

He also said the BOJ must be mindful of the rising costs of prolonged monetary easing, such as the chance years of near-zero rates could hurt financial institutions' profits and discourage them from boosting lending.

"In complex times like now, what's required is to persistently continue with the current powerful easing while weighing the benefits and costs of our policy in a balanced manner," he said.

Under a policy dubbed yield curve control (YCC), the BOJ guides short-term rates at minus 0.1 percent and the 10-year bond yield around zero percent.

(Reporting by Leika Kihara; Editing by Chris Gallagher & Shri Navaratnam)