Although the domestic demand as a whole is set to maintain its firmness, it might be difficult to expect it to offset the weakness in external demand and further elevate Japan's economic activity, Bank of Japan Deputy Governor Hirohide Yamaguchi said Monday.
Japan's economy registered relatively high growth in the first half of 2012, supported by the firmness in domestic demand, Yamaguchi said in a speech at the Asian Affairs Research Council.
But the pick-up in economic activity has come to a pause, reflecting the developments in overseas economies. Today, Standard & Poor's cut Japan's growth outlook to 2 percent for this year.
According to Yamaguchi, the outstanding amount of the Japanese government bonds will rise about JPY 92 trillion at the end of 2012, and it will be an increase of about JPY 26 trillion in one year. He observed that the purchase has already reached a substantial size.
"If by any chance such massive purchase of the JGBs is interpreted, apart from the necessity in monetary policy conduct, as aiming at fiscal monetization, confidence in the Bank could be eroded considerably and long-term interest rates could rise substantially," said Yamaguchi.
by RTT Staff Writer
For comments and feedback: firstname.lastname@example.org