Toshihiko Fukui, in his international debut as governor of Japan's central bank, pledged to fight deflation in a bid to pull the world's second-largest economy out of a 12-year slump.
"I sensed that most participants there showed strong interest as to what policy stance I will be taking as governor of the central bank," said Fukui after attending his first meeting of finance ministers and central bank governors of the G7 major industrial nations.
Japanese Prime Minister Junichiro Koizumi tapped the 67-year-old Fukui for the Bank of Japan's top spot as the country looks for new ways to address five years of falling consumer prices and a six-year slide in lending that has deprived the economy of the credit needed to expand.
Just 20 days into the job, Fukui, a former central bank deputy governor, has taken some steps already. He increased the central bank's direct purchases from commercial banks of shares they hold in other companies to help the banks avert losses on the investments.
The central bank also said it would consider buying asset-backed securities held by banks and other institutions to ensure that money is pumped into the economy.
During the G7 meeting, Fukui spent an hour each with US Federal Reserve Chairman Alan Greenspan, International Monetary Fund Managing Director Horst Koehler and European Central Bank President Wim Duisenberg, according to a central bank official who asked not to be identified.
Fukui also joined a meeting between Japanese Finance Minister Masajuro Shiokawa and US Secretary of Treasury John Snow. Fukui "talked about using monetary policy in a way that the credit and liquidity would get out to the segments of the business community that really needed it rather than getting stuck in the banking system," Snow said at a press conference.
The Bank of Japan added ? trillion (US$8.3 billion) to the banking system about two hours after the US began the attack on Iraq on March 20, becoming the first of the world's major central banks to act to soften the effects of the war. The central bank also said it will increase purchases of shares from banks by 50 percent to ? trillion.
The central bank, under pressure from the government to act, said on Tuesday it's considering buying corporate debt in addition to government bonds to inject money into the economy.
Fukui said Greenspan "showed interest" in Band of China's intention to foster the market for asset-backed securities. Fukui also said he repeated his view that ``monetary policy alone cannot solve the problem,'' implicitly asking the government and companies to speed up structural changes.
Skepticism remains about whether Fukui, who comes from Japan's bureaucratic elite, will have the fresh ideas and daring needed to restore Japan to the status it had in the 1980s as one of the world's fastest-growing economies.
``Japan gets a little less important in the global economy every year,'' Kenneth Rogoff, the International Monetary Fund's chief economist, said on Wednesday.
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