BOJ Shirakawa warns "very serious" economic prospects of Japan

Japan Bank Governor Masaaki Shirakawa speaks at a conference press in Tokyo on April 28, 2011.

Credit: Reuters/Kim Kyung - HoonBy leik kihara

TOKYO | SAT 12: 42 am EDT on April 30, 2011

Tokyo (Reuters) - Bank of Governor Masaaki Shirakawa of Japan said Saturday that the economic prospects of the country were very serious and that the central bank would take appropriate measures to support the economy.

But he offered few clues about whether and when the BOJ would expand its asset purchase scheme, only say that his next policy step will depend on the economic conditions of the time.

Shirakawa said "the BOJ believes that the Outlook for the Japanese economy as very serious", and a meeting in the lower House of the Parliament of the Finance Committee.

"We would like to adopt appropriate policy measures as necessary while the supervision of the economy and prices, taking into account the uncertainty about the Outlook is high," he said.

A legislator asked if the BOJ would consider the possibility of buying more government bonds to support the economy, Shirakawa said only: "We like to consider seriously what would be the desirable step."

The BOJ kept monetary policy unchanged on Thursday, even as it reduced its growth forecast for the current fiscal year, which began in April and warned of uncertainties about the extent of the damage that month last devastating earthquake would cause in the economy.

Shirakawa reiterated that only have expanded its asset purchase regime days after the earthquake on March 11, preferred BOXWOOD devote more time to examine the impact that would have the step in the economy.

But also left open the possibility of easing monetary policy even more if the damage caused by the higher than expected result earthquake, stressing that the central bank focus on downside risks to growth at the moment.

In a signal in the BOXWOOD were more cautious about the economic prospects of Shirakawa, Deputy Governor Kiyohiko Nishimura proposed on Thursday extended the central bank's assets purchase scheme by 5 trillion yen (62 million dollars).

While the proposal was for the Board minority, some market players said that it may be a sign that the BOJ can relax the policy as soon as next month.

Japan faces its worst crisis since the second world war after the earthquake of 9.0 magnitude and subsequent tsunami devastated the northeast coast last month.

Reflecting the economic impact, factory output fell to a record monthly pace in March, household spending declined at an annual rate of registration and another private survey showed manufacturing activity are languishing in a low period of two years.

The BOXWOOD relieved political days after the earthquake by doubling to 10 billion yen for the funds set aside for purchase of a range of financial assets, such as Government and corporate debt bonds.

If then relax the policy of the central bank, the more likely step would be to expand the new scheme, say sources familiar with the thinking of the BOJ.

Apart from the Government bonds bought under the scheme of acquisition of assets, the central bank buys 21.6 trillion yen worth of bonds in the long term the market each year.

Some lawmakers have urged the BOJ to buy more bonds market, or even directly to the Fund of the Government grant them the enormous costs for reconstruction.

(Editing by Hugh lawson)

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