BOJ’s Wakatabe Says Japan Faces More Sluggish Economic Recovery

(Bloomberg) -- The Japanese economy is in danger of a slow recovery from the coronavirus downturn, according to Bank of Japan Deputy Governor Masazumi Wakatabe.

“The real economy is quite weak. We are expecting the economy to recover but maybe the recovery pace will be quite slower,” Wakatabe said Friday during a virtual panel discussion with other central bankers. “We have already set up the whole batch of tools and programs so we can strengthen each of them.”

Japan’s economy contracted steeply in the second quarter, compared with the first three months of the year.

Wakatabe noted that the Bank of Japan is not ruling out further steps to stimulate economic activity, but any change must take into account current easing. The central bank should also carefully monitor further yen appreciation out of concern that it could weigh on price gains, he said.

“We should be really careful about the impact of that exchange rate on inflation dynamics and the employment income of the national economy,” Wakatabe said. “If we judge that the inflation dynamic would be further eroded or weakened then that’s the time that we should think about another sort of action.”

The BOJ holds its next policy meeting on Oct. 28-29 and is widely expected to keep policy unchanged for the rest of this year as it focuses on maintaining market stability and providing access to credit for companies. The yen has appreciated 3% against the U.S. dollar this year and is trading at 105 per dollar from a low of 112 in February.

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