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BoJ insists Japan economy stalling

TOKYO: Japan's central bank is sticking to its official view that the nation's economy is stalling, despite the yen's recent plunge against the dollar and the dramatic rally in Tokyo share prices.

Officials at the Bank of Japan told Reuters on Friday that it was premature to say the yen's fall would certainly help the economy, unless the Japanese currency's weak trend was firmly established.

"The weaker yen and higher share prices could be a psychologically bright factor for business sentiment, and we are hoping that improvement in corporate sentiment about business will support the economy," a senior Bank of Japan official said.

But another senior official said: "The yen has weakened, but this was just a correction of the yen's excessive rise."

The dollar rose to 99 yen this week after hovering around 85 yen in early July. It was quoted at 97.58/63 yen in late afternoon trade on Friday.

It will take time before the yen's fall actually improves companies' perceptions of the health of the economy and

encourages Japanese firms to increase capital investment, the officials said.

"Therefore, we have not changed the basic assessment of the economy since July 7. The economy is still at a standstill," another senior official said.

On July 7, the central bank announced it would guide short-term interest rates lower through its regular operations in the money market. This was two days after BoJ governor Yasuo Matsushita said the economy was stalling following a moderate recovery.

The officials said the central bank would carefully monitor the economic situation, and continue to guide short-term money market rates lower. They said the current economic situation did not require the Bank of Japan to take additional monetary measures.

A third Bank of Japan official said economic indicators such as industrial production and machinery orders have not shown any indication of movements that could help the economy resume recovery.

The officials said the central bank would collect data from corporations to assess the possible impact its past credit-easing measures, the yen's recent weakness and higher stock prices, could have on corporate business sentiment.-Reuter