Business World

Acting Bank of Japan Governor Masaaki Shirakawa said on Tuesday downside risks for the economy were growing and the outlook was uncertain, underscoring concern that the world’s second-largest economy may follow the United States into a recession.

Shirakawa, the BOJ’s first temporary governor in more than 80 years, repeated the central bank’s mantra that interest rates need to be raised from the current low 0.5 percent if the economy looks like staying on track for sustained growth.

But he stressed the importance of looking at various risks threatening the short-term economic outlook such as jittery financial markets, a global economic slowdown and rising raw material costs that are hurting smaller firms’ revenues.

“The outlook for the economy is always uncertain, and uncertainty is particularly high now,” Shirakawa told the lower house of parliament’s financial affairs committee pay day loan.

“What I always tell myself is that we should not have any preconceptions and should act flexibly by examining risks and the feasibility of our economic forecast.”

Former BOJ Governor Toshihiko Fukui picked Shirakawa, approved by parliament as new deputy BOJ governor, to head the central bank until parliament can agree on a permanent successor to Fukui himself.

Kiyohiko Nishimura, a BOJ board member promoted to deputy governor last week, told the committee that downside economic risks were heightening and that the BOJ would need to act flexibly if the risks materialize.

The two, however, did not mention the possibility of a rate cut and reiterated that despite mounting risks, the Japanese economy was still expected to expand moderately as a trend. 

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