Shirakawa Says Weighs Growth, Inflation Risks Equally

July 18 (Bloomberg) -- The Bank of Japan weighs the risks that the economy may slow with the risk that inflation will accelerate equally when formulating policy, Governor Masaaki Shirakawa said.

``We don't have any pre-set direction for policy and must carefully examine both upside and downside risks,'' Shirakawa said at a business meeting in Tokyo today. ``If asked about a numerical-weight allocation, I would say that it is fifty-fifty'' growth to inflation, he said.

Shirakawa's comments contrast with some board members, according to minutes for the June 12-13 meeting published today. At last month's meeting, some members said the bank should focus more on the risk that economic growth will slow rather than the risk that inflation will accelerate.

``Shirakawa wants to emphasize the Bank of Japan's stance that policy is neutral,'' said Hiroshi Shiraishi, an economist at Lehman Brothers Holdings Inc. in Tokyo. ``The central bank will stay on hold with little risk of secondary inflation and with the outlook for growth returning to a moderate path.''

The central bank this week lowered its economic growth forecast, raised its inflation estimate and said the economy is slowing further as higher commodity prices hurt the expansion.

The governor today said rapid gains in fuel and commodity prices are crimping capital investment, eroding household incomes and hurting consumption. Still, the central bank expects that Japan's economy will return to a recovery path and can avoid ``a deep adjustment,'' Shirakawa said.

Source: Bloomberg


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