TOKYO (AFX-ASIA) - Bank of Japan governor Masaru Hayami said weak demand may put further pressure on falling prices and attention needs to be paid to this problem.
Speaking at the opening of the BoJ branch managers' meeting, Hayami said it is very likely that the Japanese economy will continue in its current adjustment phase, with production under pressure from falling exports.
"The adjustment phase in the Japan economy is currently growing, (as shown in the) large production fall due to falling exports," he said.
He said the central bank will make every effort to manage monetary policy taking into account the global economic outlook and the impact of the slowdown in the IT sector, the continued pressure on household spending and the possible impact of sructural reforms.
"The monetary policy stance decided on in March is steadily providing a positive effect on the financial markets," Hayami said. "In order for Japan to return to the path of sustainable economic growth wit h full support from the current monetary policy easing, progress in structural reform is necessary," he said.
Hayami said the role of financial institutions is important in the smooth progress of structural reform given the severe worldwide assessment of Japan's financial system problems, such as how it may resolve the bad-debt write-off issue.
"In this situation, further efforts by the financial institutions to resolve these issues are expected," he said.