TOKYO—Bank of Japan policy board member Ryuzo Miyao said on Wednesday that the central bank will take action if necessary to stop downside risks from undermining the nation's economic recovery, bolstering the view that the BOJ may soon take further easing steps to counter the impact of the strong yen and slowing overseas demand.
"I hope the powerful recovery, mainly in production, will continue after the autumn, but there are several uneasy factors," which include the possibility of slower overseas demand, the yen's stubborn uptrend, potentially higher electricity costs and expectations for prolonged deflation, Mr. Miyao told business leaders in Hakodate, northern Japan.
"It is important to take appropriate action if judged necessary," Mr. Miyao said, though he didn't give any specific details on the possibility of further easing.
Nevertheless, Mr. Miyao's cautious remarks are likely to add to speculation that the BOJ will soon pursue additional monetary easing measures. Although the bank's policy board decided to stand pat at its latest meeting last week, many economists expect the BOJ to take action within the coming months.
Given that the pace of the U.S. economic recovery is "significantly" slowing and risks surrounding European sovereign debt problems are increasing, overseas demand could weaken more than initially expected, causing problems for Japan's export-dependant economy, Mr. Miyao said.
Mr. Miyao also voiced concern that the stubbornly strong yen may further undermine the country's industrial production base, pushing companies to shift production overseas and eventually weighing on growth.
Fears over the health of the global economy have pushed the yen—regarded as a safe-haven—to record highs. After falling to an all-time low of ¥75.94 last month, the dollar stood at around ¥76.94 as of 12:41pm local time on Wednesday.
In the face of the strong yen, the BOJ in August increased the size of its special fund, which includes asset purchases and low-cost loans, by ¥10 trillion to ¥50 trillion, in tandem with government intervention in the currency markets.
The central bank has been buying a variety of financial assets—from government and corporate debt to exchange-traded funds and real estate investment trusts—in a bid to lower interest rates and risk premiums.
Source: http://online.wsj.com
"I hope the powerful recovery, mainly in production, will continue after the autumn, but there are several uneasy factors," which include the possibility of slower overseas demand, the yen's stubborn uptrend, potentially higher electricity costs and expectations for prolonged deflation, Mr. Miyao told business leaders in Hakodate, northern Japan.
"It is important to take appropriate action if judged necessary," Mr. Miyao said, though he didn't give any specific details on the possibility of further easing.
Nevertheless, Mr. Miyao's cautious remarks are likely to add to speculation that the BOJ will soon pursue additional monetary easing measures. Although the bank's policy board decided to stand pat at its latest meeting last week, many economists expect the BOJ to take action within the coming months.
Given that the pace of the U.S. economic recovery is "significantly" slowing and risks surrounding European sovereign debt problems are increasing, overseas demand could weaken more than initially expected, causing problems for Japan's export-dependant economy, Mr. Miyao said.
Mr. Miyao also voiced concern that the stubbornly strong yen may further undermine the country's industrial production base, pushing companies to shift production overseas and eventually weighing on growth.
Fears over the health of the global economy have pushed the yen—regarded as a safe-haven—to record highs. After falling to an all-time low of ¥75.94 last month, the dollar stood at around ¥76.94 as of 12:41pm local time on Wednesday.
In the face of the strong yen, the BOJ in August increased the size of its special fund, which includes asset purchases and low-cost loans, by ¥10 trillion to ¥50 trillion, in tandem with government intervention in the currency markets.
The central bank has been buying a variety of financial assets—from government and corporate debt to exchange-traded funds and real estate investment trusts—in a bid to lower interest rates and risk premiums.
Source: http://online.wsj.com
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