• Bloomberg


The Bank of Japan is ready to implement bold and flexible measures if necessary, Deputy Gov. Hirohide Yamaguchi said Monday after the bank last week announced extra stimulus.

“We will take flexible and bold steps if we judge our policy is insufficient to achieve our policy goal,” Yamaguchi said Monday. The bank has no intention of using its policy to directly influence foreign-exchange rates, and sets policy by looking at the impact of currency moves on the economy and prices, Yamaguchi said.

Yamaguchi’s comments come after “uncertainty about the global economy” and an inflation rate that is still around zero percent prompted the bank to unexpectedly expand monetary easing last week. The yen’s appreciation and a global slowdown have threatened a recovery that has paused, according to the policy statement on Sept. 19.

The yen fell to 79.22 per dollar on Sept. 19, following the bank’s announcement. The yen was trading at 78.05 as of 2:39 p.m. Monday in Tokyo, within 4 percent of its postwar high in October.

The BOJ judged that its scenario for the economy and prices was delayed or weaker than expected, so it decided to ease at the last meeting, Yamaguchi said. At that meeting, the bank boosted the asset-purchase fund by ¥10 trillion and abandoned a floor rate for bond purchases.

The BOJ downgraded its economic assessment last week and Gov. Masaaki Shirakawa said the timing for the economy to return to a recovery path has been pushed back by about six months from the first half of this fiscal year through Sept. 31.

Prime Minister Yoshihiko Noda said the BOJ implemented a timely and appropriate measure. Noda this month said an extra budget will be needed to shore up economic growth. The bank’s holding of Japanese government bonds are projected to reach ¥92 trillion at the end of this year compared with ¥66 trillion at the end of 2011, Yamaguchi said. Yamaguchi said the central bank won’t buy government bonds to monetize debt because such action could hurt trust in the central bank and trigger an increase in bond yields.

Exports fell 5.8 percent in August from a year earlier, the third straight decline, underlining that overseas demand for Japanese-made cars, machinery and other manufactured goods is slumping, the government’s data show.

JPMorgan Securities and Credit Suisse Group AG expect Japan’s economy to contract this quarter after growth slowed to a 0.7 percent annual pace in the previous three months.

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