BOJ’s Kamezaki Says Economic Slowdown Is Temporary

Japan’s economic slowdown is probably temporary and the nation is showing signs of picking up thanks to growing exports and a weaker yen, Bank of Japan board member Hidetoshi Kamezaki said.

“There’s a high chance Japan’s economic slump will end quickly and the nation will return to a moderate growth path,” Kamezaki, 67, said today in a speech in Saga, southern Japan. He added Japan escaping its lull “remains to be seen.”

Kamezaki joins Governor Masaaki Shirakawa and other BOJ officials who in the past month have expressed optimism that the economy will emerge from its lull in the first half of this year after probably contracting in the fourth quarter. Export growth accelerated for a second month in December and industrial production increased the most in 11 months, buoyed by demand from U.S. and China.

“Recent data has continued to surpass forecasts,” Hiroaki Muto, a senior economist of Sumitomo Mitsui Asset Management Co. in Tokyo, said before the speech. “The economy may be already moving out from its slump in the current quarter.”

Japan’s currency traded at 81.46 per dollar as of 2:44 a.m. in Tokyo. The yen has fallen 1 percent in the past three months. It touched a 15-year high of 80.22 per dollar on Nov. 1.

Photographer:Tomohiro Ohsumi/Bloomberg

Hidetoshi Kamezaki, a policy board member of the Bank of Japan. Close

Hidetoshi Kamezaki, a policy board member of the Bank of Japan.

Photographer:Tomohiro Ohsumi/Bloomberg

Hidetoshi Kamezaki, a policy board member of the Bank of Japan.

”The pause in the yen’s advance is also contributing” to the expectation that the economy will escape from a slump soon, he said. He later said at a press conference the economy will start to gain momentum “around spring.”

Asked about the recent appreciation of the yen, Kamezaki said the central bank is monitoring the currency market closely.

Rapid Moves ‘Undesirable’

“Foreign-exchange movements can have a big effect on corporate and household sentiment as well as profits and we will carefully watch these moves,” said Kamezaki, a former executive of trading company Mitsubishi Corp. “It’s always undesirable for currencies to move rapidly.”

Kamezaki reiterated that the central bank will act “proactively” when setting monetary policy. He also said that Japan shouldn’t regard Europe’s fiscal woes as a “house burning on the other side of a river.” Japanese policy makers need to address the growing debt burden before they lose credibility among investors, he said.

Standard & Poor’s last week cut Japan’s credit rating to AA-, the fourth-highest level, saying it expects the country’s government debt ratios, among the highest in the industrialized world, to continue to rise.

“Financial markets have reacted calmly” Kamezaki said about the downgrade, adding that bond yields remain “very stable.”

Sovereign Debt Concern

He said people need to be aware of the risk that financial markets could move “suddenly” on concerns about sovereign debt even if there is no change in the state of the economy or the nation’s finances.

The board member said any rebound in Japan’s growth probably wouldn’t be strong because companies and households remain unwilling to spend “actively” because of uncertainties over the outlook.

The central bank last month predicted faster inflation and raised its growth forecasts for the year through March as surging overseas demand bolsters exports and pushes up commodity prices. Consumer prices excluding fresh food will increase 0.3 percent in the year starting April, higher than its October prediction of 0.1 percent, the bank said on Jan. 25.

Government Review

A government review of the consumer price index later this year will likely lead to a downward revision in the index, according to Sumitomo Mitsui’s Muto. The government revises the index every five years to reflect current price trends.

“I’m confident the economy is making progress toward ending deflation,” Kamezaki said. He added that core consumer prices will rise in the year starting April 1 as commodity costs advance and the nation’s output gap improves.

The government revision will probably lower prices by as much as 0.6 percentage point, Muto said. “The chance is pretty high that core prices will continue to decline in fiscal 2011,” he said.

Kamezaki said while the rebasing will probably push down prices, that doesn’t indicate the economy’s underlying trend is changing.

The central bank needs to monitor the effect of higher commodity prices on Japan’s economy and prices, Kamezaki said, adding that it’s undesirable for costs to be driven up by speculators.

To contact the reporters on this story: Mayumi Otsuma in Tokyo at

To contact the editor responsible for this story: Paul Panckhurst at

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