The Japanese economy is "deteriorating broadly" as falling prices and low growth are an "inevitable" consequence of the government's drive to implement structural reforms, Bank of Japan Governor Masaru Hayami said.
"This year, Japan will further push forward reforms of its economy and industries," Hayami said in a speech at a quarterly meeting of the bank's branch managers. "During this process, it's inevitable that the economy will continue to suffer a low rate of growth and prices will decline to a certain extent."
In the financial markets, companies rated a high credit risk, especially small businesses, have difficulty borrowing money, he said. The central bank is ready to take ``appropriate steps'' to inject funds into the banking system to help stem financial failures and slow deflation, the governor said.
"The central bank has implemented a series of policy-easing steps since late last year," said Koji Shimamoto, chief strategist at BNP Paribas Securities Japan Ltd. "Hayami issued a severe view on the economy today to back up the steps already taken."
Japanese bond futures fell to their lowest level in more than 11 months, erasing an earlier gain. The yen strengthened to as high as ?132.04 a dollar from ?132.57 in late New York trading Friday, before trading at ?132.27.
Central bank policy makers last week voted to leave policy unchanged.
Hayami and his eight board colleagues have exhausted most conventional means of pulling the second-largest economy from recession. It cut interest rates close to zero in March and has since made ?15 trillion (US$114 billion) available to banks to spur lending.
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