BOJ takes heart from markets' reaction after Trump win

TOKYO (Reuters) - The Bank of Japan is encouraged by stock market gains and yen declines after Donald Trump won the U.S. presidential election because this could help improve sentiment and give the economy a boost, senior central bank officials told Reuters on Wednesday. The BOJ also feels its monetary policy is working well to contain a rise in Japanese bond yields and is not talking about increasing debt purchases, they said. There are some inside the BOJ who say the central bank could consider minor upward revisions to its consumer price forecasts due to the yen's sudden fall, but many are still cautious about market moves and Trump's trade policy, the officials said. Central bankers inside the BOJ were worried that the yen could strengthen and that stocks would sell off if investors opted to move to the safe-haven Japanese currency to avoid risk in response to Trump's victory, the officials said. Instead, the yen has fallen to a five-month low on speculation that Trump's expansionary fiscal policy will lead to inflation and higher U.S. interest rates. The Nikkei share average has also jumped to a 9-1/2-month high, following a rally in global stocks. Yields on 10-year Japanese government debt have risen to 0.015 percent from minus 0.090 percent last week, but they are still in line with the BOJ's target to keep long-term rates around zero, showing the market remains calm, one official said. "You can say the yield curve control policy is working," said the official. In September, the BOJ last switched its policy target to interest rates from expanding the monetary base. Its main policy tools are a negative 0.1 percent interest rate and debt purchases to keep 10-year yields around zero. Many economists expect the BOJ to keep policy on hold as the sharp yen gains that many thought would accompany Trump's election victory have not materialised. The yen's rapid decline could even prompt the BOJ to debate a minor upgrade to its consumer price forecasts, one source said, as a weaker yen pushes up import prices. However, any revision could be only 0.1 percentage point, the source said. (Reporting by Yoshifumi Takemoto and Sumio Ito; Writing by Stanley White; Editing by Simon Cameron-Moore)