Reuters: US Dollar Report: UPDATE 1-Sato says BOJ will act if needed, wary of China slowdown

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UPDATE 1-Sato says BOJ will act if needed, wary of China slowdown Jul 22nd 2013, 03:49 Sun Jul 21, 2013 11:49pm EDT * Sato: Should see BOJ's 2 pct inflation goal a flexible one * Slowdown in China, emerging nations a concern * Says Japan's economy headed for sustainable recovery * Expects Japan annual CPI to turn positive this summer By Leika Kihara FUKUSHIMA, Japan, July 22 (Reuters) - The Bank of Japan is prepared to inject more stimulus if the economy's recovery is threatened, board member Takehiro Sato said on Monday as he pointed to risks such as the slowdown in Chinese growth. He also said the central bank's 2 percent inflation target was a flexible one that does not necessarily have to be achieved rigidly in two years -- a timeframe that had been outlined by BOJ Governor Haruhiko Kuroda. Sato, an economist who joined the BOJ board last year, said Japan was headed for a sustainable recovery as household sentiment and exports improve, but he was concerned about slowing growth in China and other emerging economies. "A high degree of uncertainty remains concerning the global economy, and I see risks to the economic outlook as somewhat tilted to the downside," Sato said. Under Kuroda's leadership, the BOJ unleashed an intense burst of monetary stimulus in April, pledging to double the supply of money in two years to meet its inflation target, and has since held off on any further easing. While that 'big bang' approach was a shift from the previous one of incremental policy steps, Sato said the BOJ would respond if the recovery in world's third-largest economy was threatened. "The BOJ does not exclude the implementation of additional measures and will not hesitate to fine-tune its policies flexibly when unexpected tail risks materialise," he said in a speech to business leaders in Fukushima, northeastern Japan. Sato, considered to be among those more cautious on the economy's outlook on the nine-member board, has doubts that 2 percent inflation can be specifically achieved in two years, and said there should be some flexibility in interpreting it. "If the inflation rate is projected to stabilise within a certain range with the median being 2 percent price growth, the main objective of the BOJ's policy will have been fulfilled," he said. Many private-sector analysts also see the BOJ's two-year timeframe as too ambitious for a country mired in deflation for 15 years. Sato said annual consumer inflation rate will likely turn positive in the summer, partly due to rising electricity bills and the weak yen that inflates the cost of energy imports. Link this Share this Digg this Email Reprints

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