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The Bank of Japan will make “decisive” policy decisions when needed by examining movements in the yen and the economy as the nation recovers from the March disasters, Deputy Gov. Hirohide Yamaguchi said in Nagano on Wednesday.

The BOJ will “take appropriate policy actions in a flexible and decisive manner” if judged necessary, Yamaguchi said in a speech to business leaders. “The bank is aware that uncertainties at home and abroad are significant.”

The yen rose to a four-month high of 78.47 to the dollar on July 14 on concern Europe’s sovereign-debt crisis will spread just as the U.S. economy slows.

Yamaguchi’s comments signal the BOJ can act even after Gov. Masaaki Shirakawa said last week that the central bank was more confident about the nation’s recovery from the March 11 earthquake and tsunami, according to analyst Mari Iwashita.

“This is a pretty dramatic change, given that Shirakawa provided a relatively sanguine view on the economy just a week ago,” said Iwashita, chief market economist at SMBC Nikko Securities Inc. “I don’t think the BOJ is considering taking action now but the comments indicate the BOJ will take action when the European debt crisis begins to take a significant toll on Japan’s stocks and the yen.”

The central bank could support an economy facing deflationary pressure by increasing its purchase of assets such as government bonds, the International Monetary Fund said in a report Tuesday.

Yamaguchi said there’s “high uncertainty” in the outlook of the U.S., Europe and emerging economies, regions that are important to Japan’s recovery.

“The most important assumption for Japan’s economic recovery” is that overseas economies grow at a fast pace, helping boost exports, capital spending and employment, Yamaguchi said.

Europe’s sovereign debt crisis will likely be a “destabilizing factor” for some time for the global economy, and it could affect Japan, the deputy governor said.

“We should be careful in that once any disruption occurs in Europe, Japan’s economy, seemingly distant, might also be involved in turmoil through a plunge in stock prices and appreciation of the yen,” he said.

Still, Yamaguchi reiterated the BOJ’s view that the economy is expected to return to a moderate recovery path in the second half of the fiscal year ending March 2012, as demand recovers after plunging in the aftermath of the March 11 temblor and tsunami.

The BOJ raised its economic assessment for a second month in July after companies ramped up production at the fastest pace in more than 50 years.

Gov. Masaaki Shirakawa and the BOJ Policy Board left the benchmark lending rate between zero and 0.1 percent at a meeting last week.

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