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158123
Tue, 01/25/2011 - 17:39
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BOJ upbeat on Japanese economy amid firm exports, production
TOKYO, (Kyodo) - The Japanese economy could soon overcome its recent pause and return to moderate recovery, Bank of Japan Governor Masaaki Shirakawa said Tuesday, citing firmer exports and production that had weakened amid the slowing global economy and the diminishing effects of the government's fiscal stimulus measures.
The central bank upgraded its growth forecast for fiscal 2010, projecting an upturn in consumer prices in the following years, after a two-day policy meeting at which it also decided to maintain its ultra-loose monetary policy to boost the economy.
''We believe it is highly probable that the Japanese economy will sooner or later exit from the situation, in which the pace of recovery slows, and return to a path of moderate recovery,'' Shirakawa told reporters, adding, ''We have brighter prospects of beating deflation.''
The BOJ is forecasting that the country's real gross domestic product will grow 3.3 percent in the current fiscal year ending March, upgrading its October projection of a 2.1 percent expansion.
After the meeting of its nine-member Policy Board, which voted unanimously to maintain comprehensive monetary easing, the central bank held its key short-term interest rate steady in the range of zero to 0.1 percent while maintaining its 5 trillion yen program to purchase assets from financial institutions and companies in order to help firms raise operating funds.
The BOJ is now expecting mild inflation in Japan on higher commodity prices during the coming years. It forecast the core consumer price index, excluding fresh food, will rise 0.3 percent in fiscal 2011, upgraded from an earlier projection of a 0.1 percent rise.
It also maintained its CPI growth forecast of 0.6 percent in fiscal 2012, while saying the index would fall 0.3 percent in fiscal 2010, lifted from a 0.4 percent decline.
Shirakawa's judgment comes in accordance with a widespread view that the Japanese economy ''will break out of the pause amid signs of overseas economic recovery,'' Koichi Haji, chief economist at NLI Research Institute.
But he also said, ''I think it is optimistic to believe we have got brighter prospects of overcoming deflation,'' stressing that the price hike the BOJ forecast is due to the higher costs of commodity imports, and that this is ''not (a type of) inflation that many people are hoping for.''
The BOJ has said it will maintain its zero-rate policy until it judges that the annual change in the core CPI is stable in a positive range of 2 percent or lower.
The summer heat and a set of fiscal stimulus measures by the government, including subsidies for the purchase of environmentally friendly vehicles and appliances, boosted the nation's consumption and production during most of fiscal 2010.
But analysts said such steps only have brought forward domestic demand and could trigger a temporary slowdown in the economy subsequently, warning that GDP growth may have dipped into negative territory in the October-December period, data for which will be released by the government Feb. 14.
The economy is expected to grow at a slower pace in following years. The BOJ slightly downgraded its estimates of real GDP growth in fiscal 2011 and 2012, citing technical reasons rather than the waning effects of the government's pump-priming measures.
It expects the economy to expand 1.6 percent and 2.0 percent in the next two fiscal years, compared with its earlier projections of 1.8 percent and 2.1 percent growth.
Nevertheless, the BOJ gave a relatively positive outlook, confirming that the Japanese economy will return to a path of moderate expansion during the first half of the year, mainly led by exports to emerging markets as well as commodity-producing countries.
The economy significantly slowed the pace of recovery starting last fall amid declining exports as well as sharply falling auto output following last-minute buying of vehicles affected by the government's incentive program.
But Shirakawa said, ''There are signs (such downward pressures) are decaying.''
China and some other Asian economies have increasingly been showing signs of recovery in industrial output after a temporary slowdown due to inventory adjustments especially in the information technology sector.
The central bank upgraded its growth forecast for fiscal 2010, projecting an upturn in consumer prices in the following years, after a two-day policy meeting at which it also decided to maintain its ultra-loose monetary policy to boost the economy.
''We believe it is highly probable that the Japanese economy will sooner or later exit from the situation, in which the pace of recovery slows, and return to a path of moderate recovery,'' Shirakawa told reporters, adding, ''We have brighter prospects of beating deflation.''
The BOJ is forecasting that the country's real gross domestic product will grow 3.3 percent in the current fiscal year ending March, upgrading its October projection of a 2.1 percent expansion.
After the meeting of its nine-member Policy Board, which voted unanimously to maintain comprehensive monetary easing, the central bank held its key short-term interest rate steady in the range of zero to 0.1 percent while maintaining its 5 trillion yen program to purchase assets from financial institutions and companies in order to help firms raise operating funds.
The BOJ is now expecting mild inflation in Japan on higher commodity prices during the coming years. It forecast the core consumer price index, excluding fresh food, will rise 0.3 percent in fiscal 2011, upgraded from an earlier projection of a 0.1 percent rise.
It also maintained its CPI growth forecast of 0.6 percent in fiscal 2012, while saying the index would fall 0.3 percent in fiscal 2010, lifted from a 0.4 percent decline.
Shirakawa's judgment comes in accordance with a widespread view that the Japanese economy ''will break out of the pause amid signs of overseas economic recovery,'' Koichi Haji, chief economist at NLI Research Institute.
But he also said, ''I think it is optimistic to believe we have got brighter prospects of overcoming deflation,'' stressing that the price hike the BOJ forecast is due to the higher costs of commodity imports, and that this is ''not (a type of) inflation that many people are hoping for.''
The BOJ has said it will maintain its zero-rate policy until it judges that the annual change in the core CPI is stable in a positive range of 2 percent or lower.
The summer heat and a set of fiscal stimulus measures by the government, including subsidies for the purchase of environmentally friendly vehicles and appliances, boosted the nation's consumption and production during most of fiscal 2010.
But analysts said such steps only have brought forward domestic demand and could trigger a temporary slowdown in the economy subsequently, warning that GDP growth may have dipped into negative territory in the October-December period, data for which will be released by the government Feb. 14.
The economy is expected to grow at a slower pace in following years. The BOJ slightly downgraded its estimates of real GDP growth in fiscal 2011 and 2012, citing technical reasons rather than the waning effects of the government's pump-priming measures.
It expects the economy to expand 1.6 percent and 2.0 percent in the next two fiscal years, compared with its earlier projections of 1.8 percent and 2.1 percent growth.
Nevertheless, the BOJ gave a relatively positive outlook, confirming that the Japanese economy will return to a path of moderate expansion during the first half of the year, mainly led by exports to emerging markets as well as commodity-producing countries.
The economy significantly slowed the pace of recovery starting last fall amid declining exports as well as sharply falling auto output following last-minute buying of vehicles affected by the government's incentive program.
But Shirakawa said, ''There are signs (such downward pressures) are decaying.''
China and some other Asian economies have increasingly been showing signs of recovery in industrial output after a temporary slowdown due to inventory adjustments especially in the information technology sector.