TOKYO, April 17 - Bank of Japan Governor Toshihiko Fukui said on Thursday he expected Japan's economic recovery to remain weak, given uncertainty in the global economy as well as pressure on corporate finances and the jobs market at home. Fukui, who took over as governor last month, said a gradual recovery in overseas economies would lead to a pick-up in exports and output, in turn bringing about a cyclical upturn. "But uncertainty persists in overseas economies, notably in the United States, and there is lingering pressure to adjust excessive indebtedness (of Japanese corporations) and over-employment," he told parliament in a summary of the BOJ's twice-yearly economic review.
"We therefore think there is a high probability that the economy will lack strength for a self-sustained recovery for a while," Fukui said. Fukui, a career central banker, started his job against the background of an economy beset by falling prices and with a financial system hobbled by piles of bad debts that make banks unwilling to lend even to healthy companies. The uncertainty affects consumer spending and sentiment, further pressuring corporate profits, while the government struggles to come up with policies that can turn things around. Fukui has pledged more transparency in policymaking and has shown willingness to consider more unusual policies in a bid to get more cash into the hands of businesses wanting to invest.
One of these is a plan to have the BOJ buy asset-backed securities issued by smaller companies in a bid to kick-start the development of a market such paper, allowing smaller firms to bypass banks. "The market for asset-backed securities is still developing in Japan," Fukui said. "But having such a market would bring many benefits for smaller companies, and we are now actively discussing how we can bring it about." Fukui has made fighting the persistent falling prices in Japan a top priority for the BOJ, and noted on Thursday that prices were continuing to fall, but at a slower rate. He also said that concerns over corporate profits and over the world economy were hurting stock prices. Japan's stock market has recently fallen to its lowest in 20 years, a serious problem for companies as many rely on their huge stockholdings to boost their profits. Fukui will appear before both houses of Japan's parliament at unspecified later dates to answer questions on the BOJ review.//www..com