BOJ's Mizuno warns Japan's output, exports may slow from autumn+

OKAYAMA, Japan, Aug. 20 Kyodo -
The recovery in Japanese output and exports may slow from autumn due to the
fragile recovery in the U.S. and European economies, Bank of Japan Policy Board
member Atsushi Mizuno said Thursday.

''It remains highly uncertain'' whether the recent pickups in the Japanese
economy will continue considering the dependence on support measures from
governments and central banks and continuing difficulties surrounding
companies, Mizuno said in a speech before local business leaders in Okayama
Prefecture.
''There is a risk that the recovery momentum of output and exports may slow
from the autumn in the face of the weak recovery of the U.S. and European
economies,'' Mizuno said. ''The downside risk of domestic private demand is not
small.''
According to government data released Monday, the Japanese economy, as measured
by gross domestic product, grew an annualized real 3.7 percent in the period
from April to June, marking the first expansion in over a year to emerge from
its worst recession in decades.
Mizuno, a former economist, however, said Japan's potential growth rate may be
falling from around the 1 percent that the central bank estimated in April,
casting doubt on the sustainability of the recent recovery.
As for an ''exit strategy'' from the extraordinary measures the BOJ has taken
to combat the global financial crisis, Mizuno said it is important to provide
information carefully ''at an early stage'' in order to avoid any confusion in
financial markets.
To support corporate financing, the BOJ has been buying corporate debt from
banks and providing them with unlimited low-interest loans since early this
year. At a July policy meeting, the bank decided to extend the end of the
measures from the Sept. 30 deadline to Dec. 31, judging that the corporate
financing situation remains severe.
With regard to falling prices, Mizuno said at a press conference after the
speech, ''What monetary policies can do is very limited,'' indicating that even
if the BOJ loosens its monetary grips further it would be difficult to prevent
Japan from sliding into deflation.
Japan's key consumer price index fell 1.7 percent in June from a year earlier,
marking the record fastest decline for the second straight month due to falling
energy costs and sluggish demand in the recession-hit economy.
''With the policy interest rate set at 0.1 percent, there is only a limited
demand-generating effect,'' Mizuno said, adding that further deregulation or
other measures by the government would be necessary to prevent deflation.
The BOJ has kept the target rate for unsecured overnight call money at 0.1
percent since December, when it cut the rate from 0.3 percent amid the
deepening financial crisis.
==Kyodo