Central banks should steer policy to stabilize prices: ex-BOJ head

TOKYO, Oct. 6 Kyodo - Former Bank of Japan Governor Toshihiko Fukui indicated Monday that central banks should give priority to addressing growing inflationary pressures around the world for the moment on the back of soaring material prices.

''It is important that central banks steer policies with a focus on stabilizing
inflationary expectations,'' Fukui said in a speech at the Japan-U.S. Business
Conference in Tokyo.
His comment suggests that Fukui believes the BOJ, the U.S. Federal Reserve and
the European Central Bank are not in a situation to move for coordinated
interest rate cuts to spur the slowing world economy.
Speculation has risen in the financial markets that the three central banks may
be exploring the possibility of coordinated rate cuts to lift the world economy
amid the deepening global financial crisis.
Fukui, who served as BOJ chief from March 2003 to March 2008, voiced concern
over the outlook for the global economy. ''The interaction between the real
economy and the finance (sector) is becoming the strongest ever,'' he said.
The former BOJ head hailed the ongoing massive injection of dollar funds into
money markets by major central banks, saying they are conducting the joint
operation while keeping up sufficient communication.
Fukui also welcomed the recent enactment of the U.S. financial bailout package.
Turning to the domestic situation, Fukui said that both upside risks to
inflation and downside risks to the economy have been rising and uncertainty
over the outlook for the economy has been also growing.
Noting that the domestic financial system has remained stable, however, Fukui
said the foundation for sustainable growth under price stability is not in a
situation to completely collapse.