KAGOSHIMA, Japan, June 5 - Bank of Japan Policy Board member Toshikatsu Fukuma said on Thursday that a weaker dollar posed risks for both Japan and overseas economies. "The dollar's decline has eased for now, but the dollar is still weakening," Fukuma said in a speech to business leaders in the southern city of Kagoshima, citing it along with falling share prices and deflationary pressures as a risk for the global economy. The Ministry of Finance is in charge of the country's foreign exchange policy, which has recently aimed to curb the yen's strength against the dollar through yen-selling intervention. The BOJ only acts as an agent when the government decides to intervene in the market and has so far been reluctant to bolster the yen-weakening campaign through, for example, buying dollar-denominated assets. Fukuma said he was worried about the impact of the SARS virus on Asian economies, particularly if it kept on spreading. "So far there has been no clear impact on production, exports and direct investment. But in some areas there have been job cuts, closure of plants and offices, and delays to expansion plans, which could directly affect production." Fukuma said. "If the spread of the virus continues after next week, then I worry about the impact on Asian demand and the region's self-sustained growth mechanisms." He said Japan's consumer price index (CPI) would likely keep falling at its current pace for a while. The latest data showed Japan's core nationwide CPI fell 0.4 percent in April from a year earlier, the 43rd straight month of decline. The BOJ has said it will maintain its quantitative easing stance until the year-on-year fall in CPI stabilises at or above zero percent. On the brighter side, Fukuma said he spotted some improvements such as a recovery in corporate profits.
A survey by the Ministry of Finance announced earlier on Thursday showed companies see their recurring profits rising nearly 10 percent in the current fiscal year. "In order to support such positive changes on the micro front, there should be macro-policies in place such as tax reforms, deregulation, and effective fiscal spending," he said, adding tax revisions were also needed to help accelerate the disposal of banks' bad loans. He also said that an early, or preemptive, injection of public funds into banks or the use of the Resolution and Collection Corp, the state-run loan collection agency, was needed to speed up bad loan disposals.//www.rueters.com