Japan finmin warns on quick exit from easy policy

By Leika Kihara

WASHINGTON, April 23 (BestGrowthStock) – Japan should be cautious
in seeking an exit from its fiscal and monetary stimulus
programs even as its economy recovers, the finance minister
said in a renewed warning to the Bank of Japan to keep its
ultra-easy interest rates in place.

The BOJ is seen revising up its economic and price
forecasts at a rate review next week. But deflation and a
fragile recovery will likely keep pressure on the central bank
to ease monetary policy further even as most other central
banks start to unwind emergency support put in place during the
global financial crisis.

Finance leaders from the Group of 20 rich and emerging
nations said on Friday they had secured a better-than-expected
global recovery but said improvements were proceeding at
different speeds within and across regions, warranting separate
policy responses for each country.

In a news conference after the G20 meeting, BOJ Governor
Masaaki Shirakawa said there were clearer signs that Japan’s
economy was picking up.

But Finance Minister Naoto Kan warned that Japan and Europe
were among the laggards in the recovery cycle, while emerging
Asian nations swiftly rebound from the financial crisis.

“I told my G20 colleagues that some countries, especially
Japan, should be somewhat cautious about heading toward an exit
now,” he told the same news conference on Friday.

Japan’s economy pulled out of recession nearly a year ago
thanks to a combination of stimulus spending, loosening of
monetary policy and a gradual recovery in exports, though
domestic demand remains weak.

But with markets jittery about Japan’s ballooning fiscal
deficit and with interest rates already near zero, the
government and the BOJ are slowly running out of options as
persistent price drops threaten to derail a fragile recovery.

The government, saddled with the biggest debt in the
developed world and struggling with sliding public approval
ratings ahead of a midyear upper house election, has been
leaning on the BOJ to support the economy.

Kan has been among the most vocal cabinet members in urging
the central bank to do more to beat deflation, which hurts the
economy as households and consumers hold back on spending on
expectations that prices will fall more in the future.
(Editing by Padraic Cassidy)

Japan finmin warns on quick exit from easy policy