March 13, 2012 / 8:45 AM / 6 years ago

BOJ's Shirakawa stresses resolve to beat deflation

TOKYO (Reuters) - Bank of Japan Governor Masaaki Shirakawa said on Tuesday that the central bank will continue to do its utmost to beat deflation but stressed that the government and private sector must also make efforts to boost the country’s potential growth.

Following are his key quotes in a news conference after the BOJ board kept monetary policy steady after last month’s surprise easing but extended a loan scheme for growth sectors:

RISKS TO ECONOMY

“Even though financial markets have calmed somewhat recently, how Europe’s sovereign debt problems may develop from now on continue to pose a big risk to the economy. Effects of crude oil price rises are also a source of concern.

“As for emerging economies and resource-exporting countries, which are expected to be a driver of the world economy, it remains highly uncertain whether emerging economies can achieve a soft landing by balancing price stability with economic growth, although China’s inflation is slowing.”

DEFLATION

“The task of overcoming deflation and achieving sustainable economic growth with price stability cannot be realized overnight. The issue of beating deflation is strongly related to how growth potential should be strengthened and patient effort is needed to tackle this problem.

“The BOJ will continue to do the best we can as a central bank. At the same time, I strongly expect that parties concerned such as companies, financial institutions and the government will do their utmost while fully recognizing the importance of strengthening growth potential.

“In managing policy, we must ensure that the economy is headed toward a path of sustainable growth and price stability. Given that the cause of deflation is structural problems such as Japan’s low growth potential, we cannot expect to achieve our goal immediately.

“But what’s important in our policy decisions is whether the economy is heading towards (desirable price growth).”

“Further enhancement of monetary easing at the last policy meeting and strengthening of the foundation for economic growth this time have been adopted as a package of steps (to beat deflation).”

MARKETS

“Since the previous policy meeting, government bond yields have declined mainly in the medium- and short-term zones. Easing of tensions in global financial markets and signs of improvement in the U.S. economy have caused the yen to weaken. Share prices too have gained due to reduced risk aversion among global investors.

“Our policy stance is one factor behind such market moves. But basically, major changes in the global situation have influenced price formation.”

POLITICAL PRESSURE

“The BOJ does not implement policy with political pressure in mind. It is important that a central bank makes decisions independently for the long-term stability of the economy and prices. A central bank changing policy in response to political pressure would be suicidal.”

Reporting by Leika Kihara, Tetsushi Kajimoto and Rie Ishiguro; Editing by Michael Watson and Chris Lewis

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