(RTTNews) - High growth rates in emerging and commodity-exporting economies have reduced downside risks for the Japanese economy, Bank of Japan Governor Masaaki Shirakawa said Wednesday.

“Given that the emerging and commodity-exporting economies are likely to continue growing at high rates, risks have been becoming balanced, compared with a situation in early spring when risks were generally tilted downside,” Shirakawa said in a speech at the Kisaragi-kai meeting in Tokyo.

Last week, the BoJ policy makers decided to hold its key interest rate at 0.1% and to end the purchase of commercial paper and corporate bonds at the end of 2009 as scheduled.

Shirakawa said the economy is likely to improve gradually in the second half of fiscal 2009, on the back of improvements in overseas economies as well as the effects of economic policy measures. Going forward, such tendency is expected to be maintained in fiscal 2010. “In fiscal 2011, Japan’s economic growth rate is likely to clearly increase,” he said.

However, the central bank chief noted that the pace of improvement in Japan’s economy is likely to be moderate until around the middle of fiscal 2010, given that the pace of recovery in the global economy and in Japan is likely to remain moderate. Also, pressure for adjusting employment and wages is likely to remain, while the effects of demand-boosting policy measures wane.

Last week, the central bank raised its economic outlook, and forecast deflation in coming fiscal years. The consumer price index, excluding fresh food, is estimated to fall 1.5% in fiscal 2009 versus 1.3% decline estimated previously. Meanwhile, the central bank forecast a 0.8% drop in prices in fiscal 2010 and a 0.4% decline in fiscal 2011. Core consumer prices dropped 2.3% in September from a year earlier compared to the decline of 2.4% in August.

“At present, it is unlikely that the decline in prices will induce downward pressure on economic activity,” Shirakawa said.
The central bank now expects the economy to shrink 3.2% in fiscal 2009 compared to a 3.4% fall estimated in July. In fiscal 2010, real GDP growth is seen at 1.2%, up from July’s forecast of 1%. The growth rate is likely to reach a level clearly above the potential growth rate in the fiscal 2011.

For comments and feedback: contact editorial@rttnews.com

Copyright(c) 2009 RTTNews.com, Inc. All Rights Reserved

Posted in Categories: Economy, Japan, Releases.

Subscribe by RSS Subscribe by Email