Bank of Japan Deputy Gov. Hirohide Yamaguchi said Wednesday that while he's optimistic about the economy in the short term, he's cautious in the long run because of the difficulty of overcoming deflation.
"Japan's economy appears to be getting out of the pause for the time being, and on the price front the deflationary situation is improving," Yamaguchi said in a speech in Aomori. Still, "there will be twists and turns until overcoming deflation is in sight."
The BOJ this month raised its assessment of the economy for the first time in nine months, saying accelerating overseas growth spurred exports and production.
"The BOJ made a small upgrade to its assessment, but there are still uncertainties about the economy's outlook and the road to overcome deflation remains bumpy," Maiko Noguchi of Daiwa Institute of Research said. The economy will likely emerge from a lull in the spring, Yamaguchi said.
Risks for growth include overheating in emerging economies and resource-exporting countries, the uncertain outlook for the U.S. and Europe, and the impact of rising commodity prices, he said.
"Amid uncertainty about the Middle East, attention should be paid to how international commodity prices will develop and how those developments will specifically affect economic activity and prices both in advanced and emerging economies," Yamaguchi said.
