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The Bank of Japan has not run out of measures to support growth but sees the economy emerging from a lull, Governor Masaaki Shirakawa said on Monday, reinforcing views that an imminent monetary easing is unlikely.
He was also cautious about significantly boosting the central bank's government bond purchases, which he warned could give markets the impression that it was directly financing government debt.
Shirakawa added that easy monetary policy alone could not end deflation and fix other problems plaguing Japan's economy, and called for deregulation and other efforts to more efficiently allocate labor and capital and boost economic growth.
"I won't say we've exhausted monetary easing measures. Having said that, we have to redouble our efforts to boost the potential growth rate," he told a news conference.
Shirakawa, in a rare appearance before foreign journalists in Tokyo, reiterated that boosting the size of the central bank's asset buying fund would be an option if economic conditions turned out substantially worse than forecast.
But he added that the economy seemed to be improving.
"As for the future, everything depends on the course of the economy. The economy is now exiting from a temporary pause. We are now observing good signs," Shirakawa told the Foreign Correspondents' Club of Japan.
"If the economy deteriorates materially from our projection, then additional purchases (of assets) could be conceivable. But the decision should be made after weighing the benefits and the costs," he said.
Japan's economy probably rebounded in the first quarter after an expected slight contraction in the final quarter of last year, as companies restock inventories and exports recover from a soft patch.
Last month, the central bank slightly nudged up its price forecast for the year starting in April, although it has stuck to its view that a recovery from grinding deflation will be long and slow.
"Shirakawa is growing more upbeat on the economy with leading indicators pointing to an improvement in overseas growth. Rising share prices and a halt in yen gains are helping too," said Hideo Kumano, chief economist at Dai-ichi Life Research Institute.
"This doesn't mean the BOJ will roll back its comprehensive easing steps any time soon. But it will maintain its current policy stance for the time being, rather than examine additional easing steps."
He was also cautious about significantly boosting the central bank's government bond purchases, which he warned could give markets the impression that it was directly financing government debt.
Shirakawa added that easy monetary policy alone could not end deflation and fix other problems plaguing Japan's economy, and called for deregulation and other efforts to more efficiently allocate labor and capital and boost economic growth.
"I won't say we've exhausted monetary easing measures. Having said that, we have to redouble our efforts to boost the potential growth rate," he told a news conference.
Shirakawa, in a rare appearance before foreign journalists in Tokyo, reiterated that boosting the size of the central bank's asset buying fund would be an option if economic conditions turned out substantially worse than forecast.
But he added that the economy seemed to be improving.
"As for the future, everything depends on the course of the economy. The economy is now exiting from a temporary pause. We are now observing good signs," Shirakawa told the Foreign Correspondents' Club of Japan.
"If the economy deteriorates materially from our projection, then additional purchases (of assets) could be conceivable. But the decision should be made after weighing the benefits and the costs," he said.
Japan's economy probably rebounded in the first quarter after an expected slight contraction in the final quarter of last year, as companies restock inventories and exports recover from a soft patch.
Last month, the central bank slightly nudged up its price forecast for the year starting in April, although it has stuck to its view that a recovery from grinding deflation will be long and slow.
"Shirakawa is growing more upbeat on the economy with leading indicators pointing to an improvement in overseas growth. Rising share prices and a halt in yen gains are helping too," said Hideo Kumano, chief economist at Dai-ichi Life Research Institute.
"This doesn't mean the BOJ will roll back its comprehensive easing steps any time soon. But it will maintain its current policy stance for the time being, rather than examine additional easing steps."
