The economy remains on a moderate recovery course, but the causes and possible impacts of the recent fall in stock prices should be studied carefully, Bank of Japan Gov. Yasuo Matsushita said Jan. 20.Given the need to ensure a strong foundation for recovery, there will be no change in the BOJ’s easy monetary policy, Matsushita said in an address to a quarterly meeting of heads of the central banks’ regional offices. Matsushita said the economy is showing signs of firming, with the upturn trend spreading to smaller businesses.But the BOJ chief also said there are still various structural adjustment pressures, and also noted that fiscal support would ebb in upcoming months. The government has terminated special cuts in income and resident tax cuts, and is to raise the consumption tax by two percentage points to 5 percent beginning April — moves which critics say could undermine the recovery.He also indicated that the central bank will closely monitor whether the stock market plunge adversely affects the economy. “Under these circumstances, it is important for a cyclical economic mechanism supported by private-sector demand to expand to ensure that the economy can make a smooth transition to self-sustaining recovery,” Matsushita said.On other issues, Matsushita said he believes financial institutions are making good progress in their efforts to get rid of their nonperforming loans, noting that this process is essential to regain public trust of the nation’s banking system. He added that he strongly hopes that revisions to the decades-old Bank of Japan Law, which are expected to be enacted during the Diet session that began the same day, would secure the central bank’s independence from the government and make its policymaking more transparent to better fit the times.

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