--Fujiwara: Recent stk falls may have negative impact on macro-econ
--BOJ Fujiwara says to monitor impact of stk falls on capital spending
--Fujiwara says BOJ to maintain easy monetary stance to support econ
--BOJ Fujiwara: Financial system stability not to be undermined
--BOJ Fujiwara says to monitor impact of stk falls on consumption
--BOJ Fujiwara says partial brightness seen in consumption
--BOJ Fujiwara says US econ slowing more rapidly than expected
--BOJ Fujiwara says stk plunge reflects worsening mkt sentiment
--Fujiwara: Zero rate policy scrapping in Aug "not inappropriate"
--BOJ Fujiwara: Japan's econ not heading toward deflationary spiral
--BOJ Fujiwara: Price falls caused by weak demand fading

By Reiko Mizutome, BridgeNews
Tokyo--Jan. 31--Current economic conditions fall within the prediction the Bank of Japan made in October that a moderate recovery led by private demand will continue, BOJ Senior Deputy Gov. Sakuya Fujiwara said Wednesday. But downside risks such as a slowing U.S. economy and weak Japanese exports, have been growing, Fujiwara warned business leaders in Tokyo.
* * * Fujiwara said: "Although downward risk factors have increased, the economy remains in a situation in which private demand is leading a gradual economic recovery."
The BOJ official said that the slowdown in the U.S. economy has occurred at a faster pace than had been expected. Fujiwara noted that the U.S. economy is nearing zero growth, according to recent comments made by Federal Reserve Board Chairman Alan Greenspan last week.
The Federal Open Market Committee (FOMC) meeting kicked of Tuesday and the Fed is expected to cut interest rates by 50 basis points to prevent a sharp slowdown in the U.S. economy.
Fujiwara admitted that the slowdown in the U.S. economy will have a negative impact on the Asian economy, which, in turn, could be bad for Japan.
Regarding financial markets, Fujiwara said that the recent drop in the Nikkei 225 Stock Average reflects global adjustments in information technology shares and worsening sentiment.
Fujiwara said that the decline in stocks could worsen the state of the macroeconomy, adding that the BOJ will monitor the possible impact on personal consumption and capital spending.
Fujiwara said: "(The BOJ) will also monitor whether market sentiment is too weak compared to real economic conditions, or whether the real economy is as weak as sentiment suggests."
Fujiwara also said that Japan's exports and industrial production have slowed somewhat, reflecting the slowdown in the U.S. economy.
On the other hand, some positive signs such as automobile sales, sales of electric appliances and spending on travel have been seen in personal consumption, he said.
Fujiwara said he believed the improvement in the corporate sector has been having a positive impact on the household sector, adding capital spending continues to increase.
Fujiwara refuted claims that Japan is in a deflationary spiral. When asked whether he considers the recent drop in prices good or bad, Fujiwara said the decline "isn't necessarily bad," because it can be attributed to reform of the distribution system, the IT revolution and imports from the rest of Asia.
Fujiwara said that, amid the fragile economy, the BOJ will maintain its easy monetary stance to support the economy.
c Asked whether it is possible the BOJ will resume the "zero-interest rate policy", Fujiwara did not comment on the issue.
Also, asked whether the "zero-interest rate policy" was terminated too early, Fujiwara said that, "I don't think the ending was too early," and, "it was not a mistake," because no major negative sign had been seen in a month after the ending.
Fujiwara said that BOJ governor Masaru Hayami requested the central bank staff to consider further fund provisional measures on Jan. 19 to prepare for possible turmoil in the financial market ahead of the end of this fiscal year.
But, the BOJ does not see the possibility of financial turmoil as being high, Fujiwara said.
Fujiwara added the BOJ hopes that such preparation will contribute to stability in the financial market and real economy.
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