Bank of Japan deputy governor Kiyohiko Nishimura said today that supply constraints resulting from last month's earthquake and tsunami are likely to ease around autumn and thereafter but he warned of risks from a prolonged nuclear crisis.
"Looking ahead to the autumn and beyond, supply constraints are likely to ease as tight power supply-and-demand improves and progress is expected to be made in restoring supply chains," Mr Nishimura said in a speech to business leaders in Yokohama, south of Tokyo.
He toed the BOJ's official line that exports and a rebound in output would likely help to support the economy's recovery once supply problems ease.
But he cautioned about a host of uncertainties on the supply side, including unstable power supplies and a prolonged crisis at a stricken nuclear plant in Fukushima.
"We need to pay attention to the risk that delays in resolving the nuclear plant problem will lead to continued power supply shortages, and that the spread of harmful rumours at home and abroad could impact Japan's exports significantly."
Mr Nishimura also warned the nuclear crisis could dampen corporate capital spending and household consumption.
"He sounded as if the BOJ believes the adverse impact from the supply chain problem is likely to be more severe than it previously expected," said Naoki Iizuka, senior economist at Mizuho Securities.
"I think there is a possibility that the BOJ will ease policy at its next meeting."
Growing evidence of pain from last month's devastating earthquake, including slumping business sentiment and output, have kept alive expectations that the BOJ may ease policy for the second time since the quake when its board next meets on April 28th.
Japan's exports fell in March at a faster pace than economists expected, suggesting that continued weakness in shipments will hurt economic growth, government data showed yesterday.
The BOJ, however, is expected to hold off on any further easing of monetary policy at its April 28th rate review, although it will consider giving clearer signals to the market that surging commodity costs alone would not shake its commitment to ultra-easy policy, even if they nudge up consumer prices, sources familiar with the central bank's thinking said.
Mr Nishimura, a former university professor and a statistics expert, joined the board in 2005 and was appointed a deputy governor in March 2008. He has voted with the majority on policy decisions and mostly followed the bank's official line.
Reuters
