BOJ's Harada says it should ease further if overseas risks hurt jobs

[TOKYO] Bank of Japan board member Yutaka Harada said the central bank should not hesitate to ease monetary policy further if overseas risks hurt job growth and threaten a broad uptrend in inflation.

The former academic defended the BOJ's massive stimulus programme, stressing that it boosted corporate profits and job growth by weakening the yen and brightening business sentiment.

He acknowledged that there were "worrying signs" in private consumption, and corporate investment remained weak.

Still, Mr Harada said he expected consumer inflation to accelerate toward the BOJ's 2 per cent target by end of the current fiscal year in March 2016 as a tightening job market gradually leads to higher wages and household income. "It's true there is a risk the economy may lose momentum... But for now, Japan's economy is recovering moderately," he told business leaders in Utsunomiya, eastern Japan, on Wednesday.

It was Mr Harada's first full-fledged speech since he joined the BOJ board in March.

The BOJ cut its inflation forecasts on Oct 30 and pushed back the timing for hitting its price target by six months. But it held off on expanding stimulus, blaming sluggish price growth mostly on the effect of slumping energy costs.

The central bank remains under pressure to ease again as Japan's economy skirts recession and sluggish overseas demand weighs on exports.

Mr Harada said Japan's recovery may falter if China and other emerging economies see growth slow further, or if an expected US interest rate hike triggers an unintended market shock. "If the job market worsens and threatens the mechanism that pushes up prices as a trend...I think it's necessary to offer additional monetary easing without hesitation," he said.

A vocal advocate of aggressive monetary easing, Mr Harada has voted with the majority since joining the nine-member policy board in March.

REUTERS