Bank of Japan Gov. Masaru Hayami said Monday he expects the economy to remain in a severe state and prices to continue falling.
But he also said the central bank will do its best to stave off a deflationary spiral.
"This year, the economic and industrial structural reform will move into full swing," Hayami told a gathering of BOJ branch managers in Tokyo. "In that process, low growth and price falls will inevitably continue. But preventing it from leading to a deflationary spiral will pose a significant policy challenge."