TOKYO (AFX-ASIA) - Bank of Japan governor Masaru Hayami said Japan's external fundamentals and its position as a net creditor will help prevent excessive yen weakness.
The dollar/yen level is "determined by the relationship between US and Japan economic fundamentals. In particular, Japan's external fundamentals, described as a 1.2 trln dollar net credit position, will help prevent any excessive weakness in the yen as the market determines (forex) levels based on supply and demand conditions," Hayami told a news conference.
Turning to the domestic economy, Hayami said the downside risk in "is deepening," if compared with the outlook in April.
"We need to have an appropriate monetary policy in view of how recent economic developments impact consumer sentiment and whether structural reforms affect the economy and how the IT indus try will affect the global economy in the future," Hayami said.
As for inflation targetting, Hayami said that at this stage "it is inappropriate for the BOJ to introduce such a system because its current stance of maintaining a current account of 5.0 trln yen (with the banks) is adequate for the moment."
Hayami said be also believes "that the BOJ needs to see how stock prices and corporate earnings develop before deciding on whether to inject public funds into the banks although at present I think there is no need to do so."
Hayami said the central bank will watch how the equity market progresses "with serious interest" because stock prices can have a big impact on the economy.