JAPAN-ECONOMY/SHIRAKAWA-PRICES (URGENT)

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Fri Dec 18, 2009 2:30am EST

BOJ Shirakawa: short-term prices won't rule policy (For more stories on the Japanese economy, click [ID:nECONJP])

TOKYO Dec 18 (Reuters) - Bank of Japan (BOJ) Governor Masaaki Shirakawa said on Friday the central bank's new definition of long-term price stability does not mean monetary policy will be guided by short-term price moves alone.

"Price stability is of course important but it is inappropriate to guide short-term monetary policy just by looking at underlying price moves," Shirakawa told a news conference.

The central bank earlier left rates on hold at 0.1 percent as expected but sent a stern message that it would not tolerate deflation, setting the scene for further monetary easing to fight deflation. [ID:nT289621]

In an unexpected move, the BOJ changed its definition of long-term price stability on Friday to clarify that it refuses to tolerate not only deflation but also flat annual consumer inflation. (Reporting by Leika Kihara and Tetsushi Kajimoto)

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