BOJ’s Miyao issues dire warning

Bloomberg

The odds of an extended world economic slowdown have increased and the Bank of Japan needs to remain ready to take decisive action if necessary, Policy Board member Ryuzo Miyao said Wednesday.

“The risk that the global economic slowdown will be prolonged is increasing slightly,” Miyao said in a speech in Shimonoseki, Yamaguchi Prefecture. Excessive strength in the yen may weigh on exports, profits and stock prices, Miyao said.

Australia on Wednesday reported slower growth in the second quarter, after a U.S. report Tuesday showed manufacturing contracted in August. The BOJ may add to monetary easing by October at the latest and a move this month is possible as exports and output weaken, according to Citigroup Inc.

Businesses around the world have become more cautious as Europe’s debt crisis persists, Miyao said. The pace of the U.S. recovery is slowing, while a rebound in China and other Asian developing nations may be delayed until after the autumn, he said.

“The decline in demand in the peripheral countries in Europe is spreading to households and corporate sentiment in core nations such as Germany, and bond yields in Spain and Italy are staying high,” Miyao said. “Given those, the risk that a recovery in the area will be delayed is increasing.”