Bank of Japan Gov. Toshihiko Fukui on Monday remained confident over the economic outlook but warned that soaring crude oil prices could hit the domestic and overseas economies.
"The Japanese economy continues to recover and it is expected to continue to do so, gathering stronger momentum," Fukui told a quarterly meeting of BOJ branch managers.
But he added, "We need to continue to monitor the movements of crude oil prices and their impact on the domestic and overseas economies."
Echoing views stated in the central bank's monthly report Wednesday on recent economic and financial developments, Fukui said exports and industrial production have kept growing, though the pace of growth has slowed a little.
Corporate profits and business sentiment are improving and capital investment is increasing, Fukui said, adding that a pickup is also seen in employment situations and personal spending.
Fukui cited the continuing expansion of the global economy and progress in terms of tackling structural problems -- including excessive debt and surplus labor in the corporate sector -- as factors behind the upbeat economic outlook.
He attributed progress in bad-loan disposal to optimism over the future course of the nation's economy.
Fukui said the nationwide core consumer price index, a key gauge that will determine the fate of the BOJ's ulraloose monetary policy, keeps falling on a year-on-year basis, while wholesale prices are rising due to high oil prices.
Fukui said the effects of the current quantitative-easing monetary policy will be stronger as the economy continues to recover and corporate profits improve.
He has said that the central bank will retain its credit-easy monetary policy until year-on-year changes in the nationwide CPI stabilize above zero.