The nation is heading toward sustainable growth and the central bank will stick with its policy of pumping cash into the economy, Bank of Japan Gov. Toshihiko Fukui said Thursday.
"On the surface, growth has slowed in the second quarter in reaction to the high-paced expansion" in the previous two quarters, Fukui said in a speech to business executives in Osaka. "But the Japanese economy is steadily heading toward a sustainable growth path in the future."
The comments were Fukui's first on the world's second-largest economy since a series of recent indicators that have suggested the pace of recovery is slowing.
Japan expanded at a 1.7 percent annual pace in the three months through June 30, the government said last month, half the rate economists had forecast.
Consumer spending will maintain a moderate recovery, Fukui said. He also said the bank sees no change in productivity or wages. Higher oil prices could affect corporate profits and consumption, he added.
Fukui said consumer prices will continue falling moderately. He said higher oil prices have eased the decline in consumer prices and repeated that rising productivity and companies' attempts to keep wages low have prevented prices from rising. Declines in rice prices will probably pressure consumer prices to fall from the autumn, he said.
The central bank has kept borrowing costs at almost zero since March 2001 to stamp out deflation and boost economic growth.