Bank of Japan governor Masaaki Shirakawa warned Monday that the country would continue to face a “severe situation” as Europe’s debt crisis and a strong yen weigh on its post-quake economic recovery.
“Japan’s economy is likely to continue to face a severe situation for the time being, especially with respect to exports,” he said in a speech to business leaders in the central city of Nagoya.
Japan fell into a trade deficit in October, reversing a year-earlier surplus, with record flooding in Thailand pounding the operations of Japanese automakers and electronics firms that have plants in the country.
Toyota and others withdrew earnings forecasts as they assess the scale of disruption, which came as Japanese firms were near to restoring output to normal levels at home after the March earthquake and tsunami shattered component supply chains.
Japan’s economy has “recovered faster than expected” following the natural disasters and a subsequent nuclear crisis, Shirakawa said, but added Europe’s fiscal woes and a strong currency would continue to dent Japanese exports.
“Japan’s economy is expected to be impacted by the adverse effects of these negative events for the time being,” he said.
“The slightly more long-term perspective is that Japan’s economy will eventually return to a sustainable growth path with price stability.”
Europe’s sovereign debt crisis was the biggest risk factor in any recovery and has been a key factor behind Japan’s surging yen, he said, as investors look for a safe-haven currency.
The yen’s rise to post-World War II highs against the dollar has prompted the central bank to intervene in foreign exchange markets to bring down the unit’s surging value, which erodes exporters’ profits and makes Japanese goods less competitive.
Earlier this month, Japan’s central bank left its key interest rate unchanged at between zero and 0.1%, while in October it announced further easing measures to help safeguard a fragile economic recovery.
The bank said it would boost its asset buying program by 5 trillion yen to 55 trillion yen, with the extra money earmarked for the purchase of Japanese government bonds.
By pouring liquidity into the market, the BOJ hopes to improve flows to help encourage investment and boost business.
Japan Today
No comments:
Post a Comment