TOKYO, Japan – The debt crisis in Europe remains the biggest risk to Japan’s economy and could potentially affect its financial system. This statement was issued by Bank of Japan Governor Masaaki Shirakawa, noting that the bank is ready to act if the market problems threaten a fragile recovery.
Shirakawa stuck to the BOJ’s stance that the third largest economy targets a recovery while demand for low emission vehicles driven by government stimulus boosts private consumption.
He also reiterated the optimistic assessments that exports and industrial production are recovering because the companies increased their capital expenditures. This also suggests that the central bank sees little need to provide additional monetary stimulus to the economy by the times.
But he also warned of risks to the outlook and the uncertainty over the global economy, especially the consequences of the current debt crisis in Europe.
“Global financial markets remain nervous about debt problems in Europe, so we need to remain vigilant at the moment,” Shirakawa said in a speech at a quarterly meeting of the managers of the regional branches of the central bank.
“The events of the debt crisis in Europe remain the biggest risks that need attention,” he said.
The BOJ will be alerted to potential risks of the debt crisis in the European financial system. However, Shirakawa assured that Japan will remain stable overall.
The BOJ set an inflation target of 1% which eased its monetary policy in February. They continued with a new stimulus money in April to show their decision when to defeat the deflation that has plagued the country for more than a decade.