A prolonged U.S. budget standoff would hit global markets very hard, the Bank of Japan warned on Friday as it said it was ready to top up its existing massive stimulus if the recovery underway in the world’s third-largest economy was threatened.
But for now, BOJ Governor Haruhiko Kuroda saw no need to ease policy further as Japan was on the path to escape deflation and, if international risks receded as hoped, government fiscal stimulus would further boost growth next year.
The U.S. budget deadlock and fears of an unprecedented U.S. default dragged Tokyo shares to a four-week low and boosted the yen, casting a cloud on an otherwise upbeat outlook for Japan’s export-driven economy.
“If this continues for a long time, this could destabilize financial markets and worsen sentiment,” Kuroda told reporters after a two-day policy review meeting, adding that the BOJ was ready to respond to any sudden shocks.
He declined to comment on the possibility of a U.S. debt default, but said the consequences of a prolonged standoff on global markets would be “severe.”
via Reuters
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