TAKAMATSU, KAGAWA PREF. – Bank of Japan Deputy Gov. Hirohide Yamaguchi said Thursday that solving Europe’s debt crisis will take time, despite EU leaders’ recent agreement to draft a new fiscal unification treaty to boost budgetary discipline.
“In terms of avoiding a recurrence of the (debt) problem, at the recent EU summit many member countries have moved forward in the direction of signing a new treaty . . . but there are issues, including specific steps to take from now on, that remain to be settled,” Yamaguchi said in a speech delivered in Kagawa Prefecture.
“Given a bumpy road to the end, we cannot completely rule out the possibility that strains in financial systems will extremely increase triggered by some events or, in the worst case, the possibility that market confidence in the maintenance of the eurozone itself will decline,” he said.
On the domestic economy, the deputy governor reiterated the BOJ’s view that the European sovereign debt problem remains the biggest risk, but also drew attention to the standoff between the West and Iran over Tehran’s suspected nuclear arms program.
“If there is mounting tension and oil prices surge, it will create upward pressure on prices in Japan, while economic activity will spiral downward . . . through a deterioration in corporate profits,” he said.