Bank of Japan (BoJ) Governor Masaaki Shirakawa said on Monday he was continuing to monitor the risk that Europe’s debt woes could affect Japan’s banking system, just as renewed fears about the eurozone spooked financial markets.
“Japan’s financial system has maintained stability as a whole, but close watch is still needed on risk factors such as a spillover from Europe’s situation,” Shirakawa said at a gathering of trust banks.
The euro slumped broadly on Monday as soaring bond yields in Spain rekindled worries about the fragile state of the euro zone economy, while broad risk-averse sentiment lifted the yen to a seven-week high against the dollar.
Shirakawa maintained the view, however, that the risk of major turmoil in global financial markets has subsided, thanks to massive fund supplies by the European Central Bank and Greece’s rescue programme.
He also stuck to the central bank’s projection of a moderate recovery for Japan’s economy and indicated the bank will maintain a ultra-loose policy bias to help pull Japan out of deflation following the BoJ’s surprise February easing.