TOKYO (Reuters) - Bank of Japan board member Yutaka Harada said on Friday the central bank should not hesitate to expand monetary stimulus further if risks, such as a deeper slowdown in emerging economies, derail Japan’s economic recovery.
Harada, a former academic, said Japan’s economy continued to recover moderately with the BOJ’s negative interest rate policy and massive asset-purchasing program exerting their intended effects.
But he warned of various risks that could hurt Japan’s economy, such as a further slowdown in China’s economy, the market fallout from changes in U.S. monetary policy as well as a potential flare up of the European debt crisis.
“If such risks materialize, it’s necessary to take additional monetary easing steps without hesitation,” Harada said in a speech at a seminar.
Harada also warned against complacency even as Japan’s jobless rate hit record lows, saying the economy may already be worsening even when job data - considered a lagging indicator - remains strong.
“We need to be mindful that it might be too late to ease monetary policy after job conditions deteriorate,” he said.
The BOJ stunned markets in January by adding negative interest rates to its massive asset-buying program in a fresh drive to accelerate inflation to its 2 percent target.
But the central bank has been on the defensive as the January decision was criticized by lawmakers and financial institutions for failing to arrest an unwelcome yen rise and confusing, rather than calming, financial markets.
Editing by Chang-Ran Kim & Shri Navaratnam