The Bank of Japan may need to provide further monetary stimulus if power shortages, supply chain disruptions and the nuclear crisis after the quake are prolonged, the International Monetary Fund's No. 3 official said.
"The risks to the economic outlook are firmly to the downside," Naoyuki Shinohara, deputy managing director at the IMF, said in an interview at his office in Washington on Wednesday. While the Bank of Japan has responded "very quickly and flexibly" to the quake, "it's necessary for the central bank to continue to take flexible action."
The Japanese economy may shrink 3 percent this quarter in the wake of the March 11 record temblor, before expanding in the second half, according to the median of 18 estimates in a Bloomberg News survey in the past week. BOJ Gov. Masaaki Shirakawa said this week the bank will take appropriate policy steps as needed, after boosting liquidity injections last month.