Japan’s economic slowdown is probably temporary and the nation is showing signs of picking up thanks to growing exports and a weaker yen, Bank of Japan (BOJ) board member Hidetoshi Kamezaki said.
“There’s a high chance Japan’s economic slump will end quickly and the nation will return to a moderate growth path,” Kamezaki, 67, said yesterday in a speech in Saga, southern Japan.
He added Japan escaping its lull “remains to be seen.”
Kamezaki joins BOJ Governor Masaaki Shirakawa and other BOJ officials who in the past month have expressed optimism that the economy will emerge from its lull in the first half of this year after probably contracting in the fourth quarter.
Export growth accelerated for a second month in December and industrial production increased the most in 11 months, buoyed by demand from US and China.
Japan’s currency traded at ￥81.46 per US dollar as of 2:44am in Tokyo. The yen has fallen 1 percent in the past three months. It touched a 15-year high of ￥80.22 per US dollar on Nov. 1.
“The pause in the yen’s advance is also contributing” to the expectation that the economy will escape from a slump soon, Kamezaki said. He later said at a press conference the economy will start to gain momentum “around spring.”
Asked about the recent appreciation of the yen, Kamezaki said the central bank is monitoring the currency market closely.
“Foreign-exchange movements can have a big effect on corporate and household sentiment as well as profits and we will carefully watch these moves,” said Kamezaki, a former executive of trading company Mitsubishi Corp. “It’s always undesirable for currencies to move rapidly.”
Kamezaki reiterated that the central bank will act “proactively” when setting monetary policy. He also said that Japan shouldn’t regard Europe’s fiscal woes as a “house burning on the other side of a river.”
Japanese policymakers need to address the growing debt burden before they lose credibility among investors, Kamezaki said.
Standard & Poor’s last week cut Japan’s credit rating to AA-, the fourth-highest level, saying it expects the country’s government debt ratios, among the highest in the industrialized world, to continue to rise.
“Financial markets have reacted calmly” Kamezaki said about the downgrade, adding that bond yields remain “very stable.”
He said people need to be aware of the risk that financial markets could move “suddenly” on concerns about sovereign debt even if there is no change in the state of the economy or the nation’s finances.
The board member said any rebound in Japan’s growth probably wouldn’t be strong because companies and households remain unwilling to spend “actively” because of uncertainties over the outlook.
The central bank last month predicted faster inflation and raised its growth forecasts for the year through next month as surging overseas demand bolsters exports and pushes up commodity prices. Consumer prices excluding fresh food will increase 0.3 percent in the year starting April, higher than its October prediction of 0.1 percent, the bank said on Jan. 25.
“I’m confident the economy is making progress toward ending deflation,” Kamezaki said.
He added that core consumer prices will rise in the year starting April 1 as commodity costs advance and the nation’s output gap improves.
Kamezaki said while the rebasing will probably push down prices, that doesn’t indicate the economy’s underlying trend is changing.