Japan's Economic Recovery Is Still Weak, Says BOJ's Harada

  • He sees consumption is probably flat, GDP increasing slighty
  • Prices don't appear to be rising, board member Harada says

There’s no denying that Japan’s economic recovery is weak and prices don’t seem to be rising, central bank board member Yutaka Harada said on Wednesday.

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The downbeat assessment from Harada, an academic economist who joined the policy board about a year ago, comes after the International Monetary Fund slashed its forecasts for Japanese growth for this year and next. The IMF predicts an economic contraction next year if Japan goes ahead with a planned sales-tax hike. Meanwhile, the BOJ’s main price gauge has been stuck around zero since mid-2015, even with massive monetary stimulus aimed at stoking inflation.

"I am not denying that the economic recovery is still weak,” Harada said in a speech in Shimonoseki, in western Japan. "That is why the bank, after the introduction of QQE, has been enhancing its monetary easing by expanding QQE and by introducing QQE with a negative interest rate."

At a press conference later in the day, Harada was asked if an expansion of the negative rate was possible at this month’s meeting. "You can’t say it’s impossible," he replied.

Although Japan’s prices haven’t risen as much as initially expected, they will rise eventually as the effects of the drop in energy prices fades and oversupply in the economy recedes, Harada said in the speech. He later told reporters that although the achievement of the bank’s 2 percent price target would be delayed, it was possible to reach it.

"As energy prices will not continue falling forever, I am confident that the CPI including energy -- that is, CPI for all items less fresh food -- will also start to rise as the effects of the fall in energy prices dissipate."

If risks to the price trend materialize, the bank should add more stimulus "without any hesitation," Harada said, echoing language used by Governor Haruhiko Kuroda and other bank officials.

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