HIGHLIGHTS 2-Shirakawa:expanding balance sheet won’t lift prices

(For more stories on the Japanese economy, click [ID:nECONJP])

TOKYO, May 31 (BestGrowthStock) – Bank of Japan Governor Masaaki
Shirakawa said on Monday that expanding the central bank’s
balance sheet or setting a rigid inflation target will not be
effective in beating deflation.

Following are key quotes from Shirakawa’s remarks in a
question-and-answer session at the Japan National Press Club:

INFLATION TARGETING

“Globally, countries’ policies over the past 20 years have
shown that focusing too much on short-term price moves caused
economies to become unstable as a result…One would lose sight
of the economy’s big imbalances…

“It is important to check whether there are other imbalances
than prices…

“Concerning inflation targeting, there are expectations that
expanding the central bank’s balance sheets would help Japan
escape deflation and cause inflation rates to rise. But the
central banks of Japan, the U.S. and Europe have expanded balance
sheets only to see drops in inflation rates. Expanding central
bank balance sheets does not immediately cause prices to rise.”

NEW LOAN SCHEME

From speech:

“The BOJ has judged that it is meaningful to support efforts
to strengthen Japan’s growth foundations from the financial side,
as falling growth expectations in the country are having big
impacts on the problem of falling prices…

“But the BOJ will not be involved in resources allocation for
individual industries and companies… By such measures as
setting a limit to the amount of loans that will be extended, the
bank intends to make sure the scheme would not influence monetary
policy.”

From question-and-answer session:

“Companies face risks on equity and liquidity when raising
funds… By easing worries about liquidity risks for a fixed
period of time, the BOJ expects to give a certain degree of a
push to the economy…

“The BOJ also wants to consider indirectly supporting new
growth areas by accepting as collateral securitised products on
related loans. It wants to make its contribution not just through
providing liquidity.”
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link to Shirakawa’s speech at Japan National Press Club

http://www.boj.or.jp/en/type/press/koen07/ko1005b.htm
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(Reporting by Leika Kihara, Rie Ishiguro)

HIGHLIGHTS 2-Shirakawa:expanding balance sheet won’t lift prices