2010.08.3006:11:00UTC+00BoJ's Shirakawa: Will Take Appropriate Actions To Support Economy

The Bank of Japan will take appropriate actions when the economic situation warrants, the central bank Governor Masaaki Shirakawa said Monday.

Speaking to reporters in Tokyo, he said the BoJ's current pace of outright government bond purchasing is the most appropriate. Shirakawa asserted that the BoJ needs to study the drawbacks of a further cut in the already low interest rate and its impact on markets.

Earlier in the day, the BoJ policy board held an extraordinary meeting and decided to introduce a new JPY 10 trillion six-month fund supplying measure, in addition to the JPY 20 trillion three-month loan measure it already has in place.

Last week, Japan's Prime Minister Naoto Kan said the government will take bold steps to address the excessive volatility in the currency market, which is having a negative impact on Japan's economic and financial stability. He also put pressure on the BoJ to step up new measures to address the current severe economic situation.

Yen's recent rise to a 15-year high against the U.S. dollar forced the government to come up with a harsh tone as the strong currency hurts the country's exports, the growth engine of the Japanese economy. Latest figures showed the Japanese economy had stagnated, edging up 0.1% between April and June.

Japan has not acted in the currency market after ending a massive yen-selling intervention in 2004 to prevent a rapid rise in the yen from aggravating deflation and derailing a fragile economy. A direct intervention will almost surely spark condemnation from Japan's G7 partners just when they are calling on China to let its yuan appreciate more freely.

Copyright(c) 2010 News.com, Inc. All Rights Reserved