Japan economy likely to decelerate more next year: BOJ's Noda

KUSHIRO, Japan, Sept. 25 Kyodo - Bank of Japan policymaker Tadao Noda said Thursday that Japan's economic
slowdown is expected to ''pick up pace'' next year, contradicting the BOJ's
official stance that the Japanese economy will get back on track for a mild
recovery.
Noda, a former deputy president of Mizuho Financial Group Inc., added at a
press conference in Kushiro, Hokkaido, ''For the near term, signs of downside
risk look more evident.''
His remarks indicate a view that the Japanese economy is unlikely to improve
before the second half of next year, analysts say.
Earlier in the day, in a presentation given in the city, he said it may take
until 2010 for the global economy to start recovering due to strains on the
international financial markets.
If the global economy decelerates at a greater-than-expected pace, it would
increase downside risks to the Japanese economy, weighing on its capital
outlays and on the employment situation, he warned.
The United States appears to be facing a cycle in which banks have stiffened
their lending standards, which in turn is hitting the U.S. real economy, he
added.
Speaking later at the press conference concerning the U.S. administration's
financial bailout plan to have the government purchase $700 billion worth of
bad assets from financial institutions, Noda said he intends to wait for
specifics to be worked out, adding that the next question would be how to
replenish the capital of those troubled institutions.
On the result of Wednesday's dollar-supply operation, in which fund demand fell
short of the amount the BOJ projected to supply, Noda said demand was weak
because Japanese financial institutions had raised dollar funds well in advance
in case such money would be needed prior to the end of this month.
But financial institutions should snap up more money at the time of the next
supply operation, in which money will be offered to meet their cash needs
around the year-end period, Noda added.
The BOJ had planned to lend a total of $30 billion against certain collateral
for one month in Wednesday's auction, but the bids submitted were worth $29.62
billion.
The BOJ acted for the first time in line with the accord reached with five
other central banks including the U.S. Federal Reserve Board and those in
Europe in order to help cash-strapped financial institutions through the
ongoing financial crisis.
A total of five rounds of dollar-fund supply are scheduled until the end of
November.