HIGHLIGHTS 3-BOJ Shirakawa quotes from news conference

TOKYO, Nov 20 - Bank of Japan Governor Masaaki Shirakawa said on Friday there was no big gap in the views of the central bank and the government that the country is experiencing sustained price falls.

Shirakawa also told a news conference there was no change in the BOJ's stance on maintaining very low interest rates to support the economy.

Following are key quotes from Shirakawa's news conference.

DEFLATION

"The drop in demand until the first half of this year was so big in Japan that I expect price falls to persist for a long period of time.

"If the government's view that the economy is in moderate deflation is based on continuous price falls, it is not different from what we have shown in our outlook report.

"The cause of sustained price falls is a lack of demand. To solve this problem, we need to expand final demand for corporate spending and for personal consumption as this is the root cause. The government, central bank and private sector must work together to resolve this.

"In order to support households and the corporate sector, the BOJ will continue with its very accommodative monetary policy ...

"What the BOJ can do is to make sure spending isn't curtailed by monetary reasons. We're making various efforts on this front, such as providing liquidity and maintaining very easy monetary conditions by keeping rates low.

"Our stance is to maintain current low rates and through this, support Japan's economy ...

"Providing liquidity can prevent prices from falling. However, when demand itself is weak, prices won't rise just through liquidity provision.

"If inflation expectations fall, or the financial system becomes unstable, this could cause price declines to lead to further price declines.

"We don't see signs of falling inflation expectations.

"The BOJ will support the economy by tackling the financial aspect of the problem, and keep its benchmark rate low."

EFFECTS OF MONETARY EASING

"It may take one and a half to two years for the impact of monetary policy to be felt. So it will take time for our policies to make their impact. It is also possible that because the economy has suffered such a big shock that even more time may be needed.

"One important thing is that we can still expect the Japanese economy to recover. As a central bank, the BOJ is always thinking about what other measures it can take to support the economy."

"The economy is moving in a direction where the effects of monetary easing will strengthen. The effects are weaker now than under ordinary circumstances but I believe they will play out more gradually from now.

"We will steadily maintain our monetary easing."

THE DOLLAR

"It's my philosophy that I should not comment on currency rates, which are not under my jurisdiction. The BOJ conducts monetary policy and the Ministry of Finance is in charge of currency policy.

"If I comment on currency as a person who is not responsible for the matter, it might cause trouble for those concerned.

"That said, I'm closely watching dollar rates, which were discussed at our policy meeting.

"As Bernanke has said, I concur that that dollar rates are strongly related to risk appetite."