BOJ Yamaguchi: will ease more if yen threatens recovery

by on July 25, 2012 6:15 am BST

HIROSHIMA, Japan, July 25 |
Wed Jul 25, 2012 2:15am EDT

(Reuters) – Bank of Japan Deputy
Governor Hirohide Yamaguchi said on Wednesday the central bank
will ease monetary policy further if the yen’s rise severely
threatens Japan’s path towards a moderate economic recovery.

But Yamaguchi said a decision on whether further monetary
stimulus is necessary is not imminent.

“What’s important is to carefully scrutinise how the yen’s
rise affects Japan’s economy,” Yamaguchi told a news conference
after meeting business leaders in Hiroshima, western Japan,
adding that the strengthening of the yen alone would not
immediately trigger monetary easing.

The BOJ said it wanted to see inflation rise to 1 percent
and eased monetary policy via an increase in asset purchases in
February, and followed up with another easing in April to show
its resolve to beat deflation, which has stifled the economy for
much of the past two decades.

The central bank has held off on further easing since then
despite slowing global growth that has driven other major
central banks to loosen policy, convinced that spending for
rebuilding from last year’s earthquake will keep Japan’s economy
on track for a moderate recovery.

Yamaguchi, one of the BOJ’s two deputy governors, is a key
figure to watch for signals on the future direction of monetary
policy. Markets count him among those board members who are more
eager to ease preemptively when needed to support the economy.