Bank of Japan Gov. Masaru Hayami said again Tuesday that the protection of bank deposits should be kept to a minimum to uphold moral standards within the banking industry.
Speaking at a news conference, the central bank chief declined to comment specifically on the government's plan to devise measures to ensure the stability of financial settlements in the lead up to the imposition of a 10 million yen refund cap beginning April 1.
He said he understands that the government is trying to address fears over the health of smaller financial institutions.
Hayami added, however, that he thought it unusual that financial institutions in Japan cannot gain the public's confidence without the government's protection.
He again called on the institutions to accelerate their efforts to regain public confidence both at home and abroad before the imposition of the refund cap.
Hayami also stated that the recent volatility in financial markets in the United States and other countries has not negatively affected Japan's real economy.
However, Japan's economy is unlikely to achieve a self-sustaining recovery in the immediate future due to weak domestic demand, he added.
"Share prices have fallen and the dollar has weakened recently, but Japan's (recent) economic data aren't so bad," Hayami said.
He said that while the recovery trend of the U.S. economy remains intact, the pace of the recovery is slowing.
"I will closely watch developments in household spending and corporate capital spending in the U.S., which have supported its economy," Hayami said.
Asked about the foreign exchange market, Hayami responded that the dollar is unlikely to fall further.