The odds of an extended world economic slowdown have increased and the Bank of Japan (8301) needs to remain ready to take decisive action if necessary, board member Ryuzo Miyao said.
“The risk that the global economic slowdown will be prolonged is increasing slightly,” Miyao said in a speech in Shimonoseki, southwestern Japan today. For Japan, excessive strength in the yen may weigh on exports, profits and stock prices, Miyao said.
Australia today reported slower growth in the second quarter, after a U.S. report yesterday showed manufacturing contracted in August in the world’s biggest economy. Japan’s central bank may add to monetary easing by October at the latest and a move this month is possible as exports and output weaken, according to Citigroup Inc.
Businesses around the world have become more cautious as Europe’s debt crisis persists, Miyao said. The pace of a U.S. recovery is slowing, while a rebound in China and other Asian developing nations may be delayed until after the autumn, the official said.
Japan stocks declined a fifth day, headed for the longest losing streak in two months. The Nikkei 225 (NKY) Stock Average was down 0.7 percent to 8,712.15 as of 12:39 p.m. in Tokyo. The yen was at 78.44 per dollar, about 4 percent from its postwar high, underscoring the threat to exporters of a strong currency.
“The decline in demand in the peripheral countries in Europe is spreading to households and corporate sentiment in core nations such as Germany, and bond yields in Spain and Italy are staying high,” Miyao said. “Given those, the risk that a recovery in the area will be delayed is increasing.”
In Japan, the world’s largest public debt burden and a deadlocked parliament may limit Prime Minister Yoshihiko Noda’s ability to supply fiscal stimulus for an economy that risks swinging to a contraction this quarter.
Australia’s gross domestic product advanced 0.6 percent from the previous three months, when it rose a revised 1.4 percent, a Bureau of Statistics report released in Sydney showed. The median of 26 estimates in a Bloomberg News survey of economists was for a 0.7 percent gain.
The Japanese central bank kept its asset-purchase fund at 45 trillion yen ($574 billion) and lending facility at 25 trillion yen at its two-day meeting ended on Aug. 9. The bank will next meet on Sept. 18 and 19.
Japan’s consumer prices slid at a faster pace in July and industrial production unexpectedly slumped, raising the danger that the world’s third-largest economy has slipped back into a contraction.
The benchmark price gauge, which excludes fresh food, fell 0.3 percent in July from a year earlier, putting the central bank’s 1 percent inflation goal further from reach, a government report showed on Aug. 31.
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