--Ex-BOJ deputy governor says bank may need to take additional steps
given weak job growth
--Says job growth not strong enough to spur BOJ's targeted 1% rise in prices
--Additional steps could include buying of longer-term JGBs and risk assets
By Tatsuo Ito
TOKYO--Former Bank of Japan Deputy Governor Kazumasa Iwata said the
central bank may need to take more easing steps as the nation's weak
job market will likely fail to stimulate wage growth and bring about
the moderate inflation the bank is targeting.
"The bottom line is that the BOJ should maintain an accommodative
monetary stance or strengthen it in some cases if needed," Mr. Iwata,
who is seen as a potential successor to current BOJ Gov. Masaaki
Shirakawa when the latter's term expires next April, told Dow Jones
Newswires in a recent interview.
Mr. Iwata, the chairman of the Japan Center for Economic Research,
stopped short of referring to a specific timing for additional action,
but he said that purchases of longer-term Japanese government bonds as
well as risk assets like stock and real-state investment funds may be
among the options for further easing.
The comments come ahead of a BOJ two-day policy-setting meeting from
Wednesday, at which the central bank is expected to leave its policy
unchanged amid recent positive signs in the Japanese economy.
Still, Mr. Iwata's views add to recent comments by lawmakers and
officials that the central bank should consider additional easing
steps despite the brighter economic outlook, as recent price data
suggest that an end to the nation's entrenched deflationary trend is
still some way off.
Mr. Iwata is less optimistic than the central bank about price and
growth prospects in the Japanese economy.
The BOJ sees consumer prices rising close to 1% in a few years if the
economy grows at a 2.3% rate in the current fiscal year that ends
March 2013 and at 1.7% in the following year.
The bank regards growth as crucial in resolving oversupply in the
economy, seen as a key factor behind falling prices. The gap between
supply and demand now stands at about Y10 trillion, or around 2.1% of
the country's gross domestic product.
While Mr. Iwata agreed that filling such a gap would tend to lift
prices, he argued that the jobless rate has also played a key role in
shaping Japan's falling price trend as it affects the price of
services and wages.
"Looking back over the past, a 1%-price rise did not materialize
unless the unemployment rate fell below 3%. Given this, it's hard to
say that we can see such a situation happening any time soon".
The jobless rate stood at 4.4% in May, while the nationwide consumer
price index, excluding volatile prices of fresh food, fell 0.1% on
year in the same month.
In February, the BOJ set a near-term 1% price goal and clarified that
it was committed to monetary easing until that goal was in sight. The
BOJ sees the consumer price index rising to 0.3% in the current fiscal
year and 0.7% in the next year.
"I personally believe it would be around 0.2% (for fiscal 2013), since
gains stemming from higher energy costs would peel off," Mr. Iwata
said, referring to consumer prices.
Looking ahead, he sees the Japanese economy's stronger-than-expected
4.7% growth rate in the first quarter slowing as the effects of
reconstruction spending wear off.
With regard to overseas economies, Mr. Iwata said the latest agreement
struck by European leaders to resolve the euro-zone debt crisis is "a
step in the right direction" but there is "still some way off to a
fundamental solution" to the crisis.
-Megumi Fujikawa contributed to this article
Write to Tatsuo Ito at tatsuo.ito@dowjones.com
(END) Dow Jones Newswires
July 09, 2012 01:50 ET (05:50 GMT)
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