TOKYO - The governor of Japan's central bank says it will persist in easing monetary conditions as it tries to pull the country out of a deflationary slump.
In comments Tuesday to branch managers of the central bank, Bank of Japan Gov. Masaaki Shirakawa noted risks from the European debt crisis and continued tensions with China over a territorial dispute that are inhibiting investment by Japanese manufacturers and other businesses.
Japan's currency, the yen, has slipped against the U.S. dollar and euro recently, in a slide that began in anticipation that Shinzo Abe, head of the Liberal Democratic Party, would become prime minister. Abe has been lobbying the central bank for aggressive action for months, demanding that it meet an inflation target of about 2 per cent, despite the bank's ostensibly independent status.
So far prices remain flat, Shirakawa said, indicating scant progress toward escaping deflation.
In announcing a 20 trillion yen ($225 billion) economic stimulus package last Friday, Abe reiterated his calls for the central bank to do more to boost growth.
"The Bank of Japan recognizes it is crucial for the economy to overcome deflation as soon as possible and resume a sustainable growth path with price stability," Shirakawa said according to a copy of his remarks on the BOJ's website.
The yen's fall to its lowest level since April 2011 has helped relieve pressure on manufacturers whose competitiveness and profitability have suffered due in part to the currency's prolonged appreciation. But many businesses have expressed concern that the yen could fall too far, adding to uncertainties and raising costs for imported fuel and other commodities.
Economics minister Akira Amari echoed those concerns Tuesday.
Although the weaker yen helps exporters, "it could damage consumers' interests," Amari told reporters. "I hope it will be at a level that will minimize the negative impact to people's lives."
The yen was trading at 88.67 to the dollar late Tuesday after trading at the mid-89 level earlier in the day. For much of past year, the yen traded below 80 to the dollar. It was at 118.82 yen per euro, down 0.8 per cent.