BoJ's Shirakawa Warns Against Persistent Upward Pressure On Yen

boj 082412

Bank of Japan Governor Masaaki Shirakawa on Friday reiterated his warning against prolonged gains in the yen, saying chronic upward pressure on the yen is placing downward pressure on Japan's economy.

"The central bank will do its utmost to ensure the stability of Japan's financial system while cooperating closely with other central banks," he said during a speech at a meeting with business leaders in Osaka.

Shirakawa also noted that while yen's appreciation is putting downward pressure on exports, it has also raised real purchasing power. Improving corporate profits and employee income, and firmer consumption by the elderly will continue, to some extent, to underpin the sustainable recovery of the domestic economy, he added.

He repeated that the authorities must remain highly vigilant to the risk of the European debt problem possibly deteriorating further. A wide rage of uncertainty remained with respect to the recovery of foreign demand, the central banker added.

Shirakawa said the economy is expected to return to a moderate recovery path as domestic demand remains firm and overseas economies emerge from the deceleration phase, repeating the central bank's view of the economy.

The bank expects the economy to grow 2.2 percent in fiscal 2012 and 1.7 percent in 2013. The BoJ has also forecast the rate of inflation to gradually rise to a range of above 0.5 percent and less than 1 percent toward fiscal 2013.

Shirakawa said the effects of monetary easing will continue to strengthen as this process continues. At present, BoJ is in the process of increasing the size of the program by another JPY 12 trillion, he added.

The bank expanded the total amount of the Asset Purchase Program in February and April, so that by the end of June 2013, the total size of the program reaches to about JPY 70 trillion as announced.

On the current global economic situation, Shirakawa said "we need to face the reality that the global economy has no choice but to live with the risks inherent to the European debt problem for some time to come."

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