YOKOHAMA: Bank of Japan Deputy Governor Kiyohiko Nishimura said on Thursday that supply constraints resulting from last month's earthquake and tsunami are likely to ease around autumn and beyond, but he warned of risks from a prolonged nuclear crisis.
Following are key quotes from Nishimura's speech to business leaders in Yokohama, near Tokyo.
"The key for the outlook is when and how the supply-side constraints caused by the disaster will be removed. On this point, I must say that there is a great deal of uncertainty about when they will be removed.
"It is unlikely that the supply-side constraints will be removed anytime soon. I must say that Japan's economy is likely to remain under strong downward pressure, mainly on the production side, for some time to come.
"However, looking ahead to the autumn and beyond, the supply-side constraints are likely to ease as the tightness in electricity supply-and-demand balance improves and progress is expected to be made in the reconfiguration of supply chains.
"If that is the case, as long as the global economy continues to record high growth led by emerging and commodity-exporting economies, which is likely, a recovery in production in Japan and ensuing increase in exports will probably serve as one driving force behind a recovery in Japan's economy.
"The efforts of the private and public sectors to restore capital stock damaged by the disaster -- roads, ports and harbours, factories, commercial facilities, and houses -- will become more pronounced.
"If such 'rebuilding demand' emerges, it will contribute to Japan's economic growth. However, I must say that there is considerable uncertainty with respect to the timing and scale of any such demand."
"We need to pay attention to the risk that delays in resolving the nuclear plant problem will lead to continued power supply shortages, and that the spread of harmful rumours at home and abroad could impact Japan's exports significantly.
"Moreover, as they seek to reconstruct their supply chains, some firms could consequently speed up the process of shifting their production bases to overseas locations.
"There is also a risk that the disaster and power plant accident might put a chill on corporate investment and households' consumption, thereby reducing growth expectations for Japan's economy."
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