TOKYO (AFP) — Japan is likely to avoid a deep economic downturn thanks to the robust health of the corporate sector and the country's super-low interest rates, the head of the central bank said Monday.
While growth is expected to remain sluggish for now, "Japan's economy is unlikely to experience a deep adjustment phase," Bank of Japan governor Masaaki Shirakawa said.
Corporate restructuring has eliminated the kind of production, employment and debt excesses that weighed heavily on Asia's largest economy during past downturns, he said at a meeting with business leaders in Osaka.
Also, "losses incurred by Japanese financial institutions due to the subprime mortgage problem are limited compared with those of US and European financial institutions and Japanese financial markets continue to be stable," he said.
At the same time borrowing costs remain low, helping to facilitate business activity, Shirakawa said.
Japan's central bank has left its benchmark interest rate unchanged at 0.5 percent -- the lowest among major economies -- since February 2007.
While economic growth stalled in the second quarter, inflation is running at the fastest pace in a decade due to the soaring cost of commodity imports.
Consumer price inflation is likely to pick up slightly over the coming months but should slow afterwards as global commodity markets cool, Shirakawa said.
Japan's core inflation rate hit a decade-high of 1.9 percent in June. Wholesale inflation jumped to a 27-year high of 7.1 percent in July.
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