But this Japanese Greenspan says not to worry ...
nni.nikkei.co.jp
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Wednesday, August 29, 2001
Hayami: Don't Think Stock Falls Greatly Hurt Fin System
OSAKA (Dow Jones)--The Bank of Japan will study inflation targets for possible future use, the governor of the central bank said Wednesday.
"I don't think it is appropriate now, but we will study the issue closely for the future," Hayami said in a news conference in Osaka.
"Inflation is favorable for cash borrowers, but bad for cash lenders and households... It would be a problem socially, as well as politically," he said.
Hayami said the BOJ's decision in March to hold overnight rates virtually at zero until consumer prices start rising doesn't amount to an explicit inflation target.
"The policy directive regarding CPI (the consumer price index) is not an inflation target, but it shows the BOJ's strong will to stop prices from falling," Hayami said.
The governor added that the BOJ is ready to do its utmost to achieve an economic recovery and stop prices from falling.
Two weeks ago, the BOJ policy board decided by majority vote to increase the quantity of money it supplies to the financial system by lifting its bank reserves target by Y1 trillion to Y6 trillion.
While it is too early to fully judge the effects of the easing move, Hayami said that the action had been effective in keeping September half-year bookclosing rates from rising.
But the governor reiterated remarks in an earlier speech that monetary policy alone isn't enough to stimulate an economic recovery without structural reforms.
Hayami, speaking after the Nikkei 225 stock index closed at a near-17 year low, appeared unconcerned about the recent slide in share prices.
"I don't think the fall in stocks would really hurt the financial system," he said. But he emphasized the bank will continue to monitor stock prices carefully.
Hayami reiterated foreign exchange rates should be set by the financial markets and that the recent rise in the yen reflects weakness in the dollar and not yen strength.
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