TOKYO: Japanese banks are having no trouble raising funds despite tensions in global financial markets, Bank of Japan Governor Masaaki Shirakawa said, although he warned that the fallout from Europe's sovereign debt crisis warranted close vigilance.
Shirakawa also reiterated the central bank's assessment that Japan's economy will stall for the time being before resuming a moderate recovery due to slowing global growth and the pain from a strong yen.
"Europe's sovereign debt problem remains the biggest risk. This problem may hurt not just Europe's economy but the global economy as a whole through financial market moves," he said in a speech at a quarterly meeting of the central bank's regional branch managers.
Shirakawa's remarks came as Asian share prices fell on Monday on Standard & Poor's decision late last week to downgrade the credit ratings of nine euro-zone countries, stripping France and Austria of their coveted triple-A status.
"Japanese financial institutions are not facing any problems in procuring funds but we must continue to carefully watch for risks to Japan's financial system, such as the fallout from Europe's sovereign debt problems," Shirakawa said.
He added that while capital spending was increasing moderately as a trend and private consumption was holding up, improvement in business sentiment was moderating.
The BoJ kept monetary settings unchanged last month but cut its economic assessment and acknowledged that growth will stall at least until spring this year.
The central bank's nine-member board is expected to stand pat on policy at its rate review next week unless Europe's debt crisis destabilises markets and sparks a renewed yen spike.
But it is expected to cut its economic projections for the fiscal year ending in March, and the following year, as companies feel the pain from slowing global demand, say sources familiar with the central bank's thinking.
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