Bank of Japan governor hopes for growth in the third quarter

BANK of Japan Governor Masaaki Shirakawa yesterday expressed hope that the country’s economic growth will turn positive in the third quarter of this year as supply constraints ease.

Shirakawa also dismissed calls for the central bank to underwrite government bonds to finance reconstruction, which has been called for by some Japanese politicians.

Business and household sentiment are deteriorating due to the earthquake, tsunami and nuclear crisis that struck northeast Japan last month, Shirakawa said, adding that power shortages triggered by the devastating earthquake and subsequent supply constraints would ease after the summer.

“It would be tough for output to rebound in one or two months,” as was the case after the 1995 Kobe earthquake, Shirakawa said.

“But supply constraints will ease over time and reconstruction demand will certainly emerge,” he said. “We need to monitor developments without any preset ideas, particularly when there is so much uncertainty.”

Shirakawa did not comment on monetary policy or on Thursday’s economic and price outlook report.