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BOJ's Ishida warns prolonged market tumult may hurt Japan's economy
[FUKUOKA] Bank of Japan board member Koji Ishida on Thursday warned that prolonged global market turbulence could hurt Japan's economy by damaging household and corporate sentiment.
But he said sharp declines in energy costs were beneficial for a fuel-importing country like Japan, adding that concerns the current oil rout may trigger a global recession were overdone.
"We've seen several cases in the past where a spike in oil prices pushed the global economy into recession. But we've never seen slumping oil prices trigger recession," Mr Ishida said in a speech to business leaders in Fukuoka, southern Japan. "I don't think we need to be too worried."
Concern over China's slowdown and the impact of slumping oil costs on resource-exporting nations have drove down global equity prices including those in Tokyo, undermining the wealth effect of the BOJ's monetary easing steps.
"If (the global market turbulence) is prolonged, it could affect household and business sentiment and have repercussions on the economy so we need to be mindful," Mr Ishida said.
Mr Ishida was among four in the nine-member board who voted against the BOJ's decision to adopt negative interest rates last month, arguing that doing so would have little positive effect on the economy because borrowing costs were already very low.
The former banker did not elaborate on why he cast a dissenting vote, instead toeing the BOJ's official view that its massive monetary stimulus will help accelerate inflation to its 2 percent target.
But he stressed the difficulty of pushing up wages in Japan, pointing to its unique labour market system as hampering premier Shinzo Abe's drive to nudge companies into raising wages.
As Japan's rigid labour laws make it difficult to lay off permanent employees, companies tend to hire new graduates and offer beneficial treatment to retain them.
That gives the employees an incentive to stay at the company instead of switching jobs to seek higher pay, limiting job mobility in Japan, Mr Ishida said.
"We must change the job market framework so that there is a smooth transition of labour, via wages, to highly-productive companies from low-productivity companies," he said, though he added that such transformation will likely take time.