Bank of Japan Policy Board member Miyako Suda reiterated the central bank’s view Wednesday that the economy will continue to expand gradually, saying upside and downside risks for growth are evenly balanced.
“In my view, upside and downside risks for the economy are almost balanced, while the economy’s outlook is highly uncertain,” Suda said at an economic forum in Tokyo. “The central bank will make persistent efforts to achieve sustainable growth with stable prices.”
Stocks rose and the yen weakened this past week on increased speculation that the BOJ may take more policy actions to counter deflation. Suda, who opposed some emergency lending measures the BOJ implemented amid the global financial crisis, reiterated its pledge to support the recovery with monetary policy.
“In terms of monetary policy, we will maintain an extremely accommodative financial environment,” Suda said.
BOJ Gov. Masaaki Shirakawa will hold his next rate-setting meeting March 16-17. Board members who have spoken publicly in the past month haven’t signaled a need for easier policy. Member Tadao Noda said last week risks for the outlook are balanced and further monetary easing would have limited impact, given that the benchmark interest rate is at 0.1 percent.
Faster economic growth supported by a resurgence in exports and factory production hasn’t spread to the domestic economy, which is still grappling with falling prices. Consumer prices excluding fresh food slid 1.3 percent in January from a year earlier, an 11th straight decline. Separate reports Wednesday showed the costs producers pay fell for a 14th consecutive month in February and machinery orders slid 3.7 percent in January.
Consumer prices “are expected to keep falling around the current pace for the time being,” Suda said. “Given that the balance between supply and demand in the economy will likely improve gradually, the pace of price declines will start to moderate again.”
Board members said in December they won’t tolerate price declines and stamping out deflation is a crucial challenge.
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