Wed, Jan 16, 2013 - Page 15 News List

BOJ governor backs more easing amid a weak yen

PRICE STABILITY:Officials and businesses are concerned that a sharp fall in the yen could raise imported fuel and other commodity prices and negatively affect consumers

AP and AFP, TOKYO

The Bank of Japan will continue easing monetary conditions as it tries to pull the country out of a deflationary slump, the bank’s chief said yesterday.

In comments to branch managers of the central bank, Bank of Japan (BOJ) Governor Masaaki Shirakawa said that risks from the European debt crisis and continued tensions with China over a territorial dispute were inhibiting investment by Japanese manufacturers and other businesses.

The Japanese yen has slipped against the US dollar and euro recently, in a slide that began in anticipation that Shinzo Abe, head of the Liberal Democratic Party, would become Japanese prime minister. Abe has been lobbying the central bank for aggressive action for months, demanding that it meet an inflation target of about 2 percent, despite the bank’s ostensibly independent status.

So far prices remain flat, Shirakawa said, indicating scant progress toward escaping deflation.

In announcing a ¥20 trillion (US$225 billion) economic stimulus package on Friday, Abe reiterated his calls for the central bank to do more to boost growth.

“The Bank of Japan recognizes it is crucial for the economy to overcome deflation as soon as possible and resume a sustainable growth path with price stability,” Shirakawa said, according to a copy of his remarks on the bank’s Web site.

The yen’s fall to its lowest level since April 2011 has helped relieve pressure on manufacturers whose competitiveness and profitability have suffered due in part to the currency’s prolonged appreciation.

However, many businesses have expressed concern that the yen could fall too far, adding to uncertainties and raising costs for imported fuel and other commodities.

The yen rebounded yesterday after Japanese Minister of Economy, Trade and Industry Akira Amari said the local currency’s sharp decline could hit consumers by making imported goods more expensive as the economy stumbles.

“Obviously, an excessively weak yen will be reflected in import prices,” Amari told a regular Tokyo press briefing.

“It might help exports, but it could also have negative effects on the lives of the public,” he said.

The US dollar — which changed hands at ¥89.56 in morning trade — dropped to ¥88.74, while the euro was lower at ¥118.47 in late afternoon Tokyo trade, from ¥119.93 yesterday morning.

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