The quantitative and qualitative monetary easing, or QQE, policy introduced by the Bank of Japan, or BOJ, to reach target inflation rates has been having its intended effects, BOJ Deputy Governor Hiroshi Nakaso said in his speech on Wednesday.
Speaking at a meeting with business leaders in Shizuoka, the deputy governor said though the current inflation rate of 1 1/4 percent is only half of the 2 percent target, the desired rate will be reached in or around 2015.
Nakaso remarked that the domestic economy has been growing at a pace above its potential, as a trend despite being hit by the font-end loading of and subsequent decline in demand due to the consumption tax hike.
He added while domestic demand remains firm, exports have recently been sluggish.
"with global financial markets remaining stable and the recovery of overseas economies, including business fixed investment, gaining strength, it seems likely that the factors hampering Japan's exports will gradually disappear. Therefore, real exports are expected to increase moderately." he said.
On Japan's financial systems, he said, "At present, there are no significant problems concerning the stability of the financial system. Japanese financial institutions as a whole have a sufficient capital base, and even if there should be a large domestic financial or economic shock, the likelihood that financial intermediation will be significantly impaired is very small"
"However, at the global level, following the experience of the global financial crisis, there have been calls to prepare for potential risks in international financial markets and the financial system in order to prevent any shocks from spreading. Against this background, requirements of financial institutions to ensure their soundness and improve their business management have become more stringent", he noted.
Nakaso noted that the economy of the Shizuoka Prefecture has been recovering moderately in the recent time, though the growth lacks vigour compared to the rest of the country.
"the imminent challenge facing Shizuoka Prefecture is to create new industries to more than compensate for the decline in production and exports after the global financial crisis. I am quite encouraged to hear that promising and ambitious initiatives have already been launched." he said.
He also said that in pursuing QQE, it is important to examine the performance of regional economies through the Bank's nationwide branch network, including the Bank's Shizuoka branch.
"I sincerely hope that the various initiatives in Shizuoka Prefecture will bear fruit and the region will enjoy further growth in the future." he said.
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