BOJ chief defends policy ahead of G20 as economy contracts

Thu Feb 14, 2013 5:43am EST
 

By Leika Kihara and Kaori Kaneko

TOKYO (Reuters) - Bank of Japan Governor Masaaki Shirakawa defended the central bank's aggressive monetary expansion, saying it was aimed at reviving the economy not at weakening the yen, as the country came under fresh international criticism ahead of a closely watched G20 gathering.

His comments came after data showed Japan's economy unexpectedly contracted in the fourth quarter, failing to escape a mild recession and playing into the hands of a government pushing for more radical stimulus measures that could cause the currency to weaken further.

Shirakawa said he would make that point clear to his Group of 20 counterparts at the weekend meeting in Russia, where Japan may face heat from some countries unhappy with the yen's recent steep falls, such as export competitor South Korea.

"The BOJ is conducting monetary policy to achieve stability in Japan's economy. It will continue to do so," he told a news conference on Thursday, hours before heading for Moscow.

Expectations that Prime Minister Shinzo Abe will keep pushing the central bank for bolder measures to beat deflation have driven the yen down nearly 20 percent against the dollar since November.

That has offered some relief to the export-reliant economy, which contracted 0.1 percent in the fourth quarter but is showing some signs of a pick-up, thanks to improving global demand and the effect of policy stimulus.

The BOJ struck a more positive note on the economy earlier in the day while keeping its policy on hold, after having boosted its monetary stimulus and doubled its inflation target to 2 percent just a month ago.

The yen's fast-paced declines, however, have stirred an international debate over whether Japan was effectively using money printing to steer the yen lower.   Continued...

 
Bank of Japan (BOJ) board member Ryuzo Miyao is seen between reporters as he speaks during a news conference at the BOJ headquarters in Tokyo March 26, 2010. REUTERS/Issei Kato