DUBAI – Japan and its central bank will keep up joint efforts to ensure stability in the nation’s financial sector and fight deflation, Bank of Japan Gov. Toshihiko Fukui said Sunday.
Addressing a meeting in Dubai of the International Monetary and Financial Committee, Fukui said Japan will continue to pursue comprehensive structural reforms in such areas as regulation, the financial sector, taxation and government spending in a bid to ensure sustainable economic growth.
The BOJ is “firmly committed to” maintaining its ultra-easy monetary policy until the consumer price index registers zero percent or above in a stable manner, he said.
The comment apparently was intended to keep financial markets from pushing up long-term interest rates on expectations that the BOJ’s quantitative easing policy is about to end.
Fukui spoke at the IMFC in place of Finance Minister Masajuro Shiokawa, who missed the gathering due to health concerns.
Fukui also represented Japan at a meeting Saturday of the Group of Seven financial leaders with Zembei Mizoguchi, vice finance minister for international affairs.
The central banker said Japan plans to keep its belt-tightening fiscal stance for the fiscal 2004 budget. He added the government sees greater privatization in the economy and effective budget allocation as ways to promote structural reforms.
Fukui said the nation’s financial revitalization program unveiled last October by the Financial Services Agency helped major banks reduce their bad loans, suggesting the banks may reach the government’s goal of halving the ratio of bad loans to their total outstanding lending from March 2002 to March 2005.
Fukui drew a rosy picture of the outlook for the economy, saying it “is showing signs of recovery” due to rising stock prices and improving corporate earnings.
He also reported Japan’s gross domestic product for the April-June quarter grew 3.9 percent on an annualized basis, far higher than private-sector economists’ forecast, spurred by brisk capital investment.
Fukui said the Asian economy is expected to continue its robust growth given receding concerns over geopolitical risks and SARS.
He underlined the importance of establishing regional bond markets to ensure sustainable growth in the medium to long terms, with a view to better utilize the region’s high level of savings.
Monetary easing urged
DUBAI (Kyodo) The managing director of the International Monetary Fund called Sunday on Japan to ease its monetary grip “aggressively” to stop deflation.
Horst Koehler also said during an annual meeting of the IMF’s policy-guiding panel in Dubai that the pace of recovery in Japan may remain moderate due to “entrenched deflation and weakness in corporate, financial and public-sector balance sheets.”
“In Japan, a more aggressive monetary easing is desirable to address deflation,” he said. “And with inflation very low elsewhere, there would be scope in most regions for further monetary easing if recovery falters or inflation significantly undershoots policy objectives.”
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