BOJ Yamaguchi: Won’t hesitate to ease further if risks spike

by on July 25, 2012 2:23 am BST

HIROSHIMA, July 25 |
Tue Jul 24, 2012 10:23pm EDT

(Reuters) – Bank of Japan Deputy Governor
Hirohide Yamaguchi said on Wednesday the central bank will not
hesitate to ease monetary policy further if risks to Japan’s
economy heighten sharply resulting from some kind of shock.

Yamaguchi said the effect of the BOJ’s monetary easing will
gradually broaden as the central bank steadily purchases assets
to meet the existing target under its asset buying programme.

“But of course if some kind of shock leads to the economy
undershooting our forecast or heightens risks to the outlook
sharply, we won’t hesitate to ease monetary policy further,”
Yamaguchi said in a speech to business leaders in Hiroshima,
western Japan.

The BOJ said it wanted to see 1 percent inflation 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 most 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 and tsunami 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.