Global economic risks have heightened somewhat following a slew of weak U.S. data but not enough to affect the outlook for Japan's economy, a Bank of Japan policymaker said, reinforcing views that the central bank will remain on hold in the near term.
Yoshihisa Morimoto also repeated the central bank's view that Japanese output and exports will return to levels seen before the March 11 disaster in the third quarter, as companies make steady progress restoring supply chains.
"Our initial expectation was for supply constraints to ease in autumn and beyond but we now expect those constraints to be fully resolved around autumn, while production is highly likely to recover to pre-quake levels in July-September," he told business leaders in Nagasaki, southern Japan, on Thursday.
Overseas growth would then become the driver for Japan's recovery, Morimoto said, sticking to the BOJ's official view, although he sounded a note of caution about increased risks in overseas economies.
"Risks from the global economy seem to be larger than before," he said, citing recent U.S. data showing a loss of momentum for the world's No. 1 economy as well as Europe's lingering debt woes.
Still, he suggested that those risks had not become serious enough to affect the outlook for the Japanese economy.
"Many recent U.S. economic data fell short of forecasts and cautious views are spreading about the U.S. economy," Morimoto told a news conference.
"But this is likely to ease to a certain degree over time and with U.S. monetary policy remaining easy, growth is likely to resume."
Markets remain confident that the chances are slim of further BOJ easing in the near term.
"There are risks, but the BOJ can afford to stay on hold for a while as the economy recovers from the earthquake," said Yasuo Yamamoto, senior economist at Mizuho Research Institute in Tokyo.
"We do have to be worried about a surge in the yen if Greece defaults. This could lead to some form of easing from the BOJ."
POWER SHORTAGE
The BOJ last week stood pat on policy but expanded a loan scheme targeting growth industries. It also upgraded its assessment of the economy, which it said was showing some signs of picking up following a slump triggered by the March earthquake and tsunami.
The central bank is expected to cut its economic forecast for the current fiscal year that began in April when it conducts a quarterly review of its long-term projections next month, sources familiar with the bank's thinking said.
But this would be a technical revision reflecting the steep contraction in January-March GDP and revisions to last year's figures, and would not affect monetary policy.
Analysts expect Japan's economy to recover from the third quarter of this year but say slowing overseas growth remains a potential risk.
Power cuts could also disrupt manufacturing activity in the summer, although companies have been making progress in restoring lost production and mending supply chains for parts.
Morimoto, who joined the board on July 1 of last year, is a former executive at Tokyo Electric Power Co , the operator of a nuclear power plant that was crippled by the earthquake and tsunami.
He has voted with the majority since joining the board and has toed the BOJ's official line on policy.
He warned at Thursday's news conference that a prolonged suspension of nuclear power plant operations across Japan would seriously hurt the economy.
Several Japanese nuclear reactors have been unable to restart in recent months after the completion of routine maintenance, as public wariness over safety amid the radiation crisis at Tokyo Electric's Fukushima Daiichi plant has left local governments reluctant to approve resumptions.
Source: www.reuters.com
Yoshihisa Morimoto also repeated the central bank's view that Japanese output and exports will return to levels seen before the March 11 disaster in the third quarter, as companies make steady progress restoring supply chains.
"Our initial expectation was for supply constraints to ease in autumn and beyond but we now expect those constraints to be fully resolved around autumn, while production is highly likely to recover to pre-quake levels in July-September," he told business leaders in Nagasaki, southern Japan, on Thursday.
Overseas growth would then become the driver for Japan's recovery, Morimoto said, sticking to the BOJ's official view, although he sounded a note of caution about increased risks in overseas economies.
"Risks from the global economy seem to be larger than before," he said, citing recent U.S. data showing a loss of momentum for the world's No. 1 economy as well as Europe's lingering debt woes.
Still, he suggested that those risks had not become serious enough to affect the outlook for the Japanese economy.
"Many recent U.S. economic data fell short of forecasts and cautious views are spreading about the U.S. economy," Morimoto told a news conference.
"But this is likely to ease to a certain degree over time and with U.S. monetary policy remaining easy, growth is likely to resume."
Markets remain confident that the chances are slim of further BOJ easing in the near term.
"There are risks, but the BOJ can afford to stay on hold for a while as the economy recovers from the earthquake," said Yasuo Yamamoto, senior economist at Mizuho Research Institute in Tokyo.
"We do have to be worried about a surge in the yen if Greece defaults. This could lead to some form of easing from the BOJ."
POWER SHORTAGE
The BOJ last week stood pat on policy but expanded a loan scheme targeting growth industries. It also upgraded its assessment of the economy, which it said was showing some signs of picking up following a slump triggered by the March earthquake and tsunami.
The central bank is expected to cut its economic forecast for the current fiscal year that began in April when it conducts a quarterly review of its long-term projections next month, sources familiar with the bank's thinking said.
But this would be a technical revision reflecting the steep contraction in January-March GDP and revisions to last year's figures, and would not affect monetary policy.
Analysts expect Japan's economy to recover from the third quarter of this year but say slowing overseas growth remains a potential risk.
Power cuts could also disrupt manufacturing activity in the summer, although companies have been making progress in restoring lost production and mending supply chains for parts.
Morimoto, who joined the board on July 1 of last year, is a former executive at Tokyo Electric Power Co , the operator of a nuclear power plant that was crippled by the earthquake and tsunami.
He has voted with the majority since joining the board and has toed the BOJ's official line on policy.
He warned at Thursday's news conference that a prolonged suspension of nuclear power plant operations across Japan would seriously hurt the economy.
Several Japanese nuclear reactors have been unable to restart in recent months after the completion of routine maintenance, as public wariness over safety amid the radiation crisis at Tokyo Electric's Fukushima Daiichi plant has left local governments reluctant to approve resumptions.
Source: www.reuters.com
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