Japan's new finance minister - cautious one

Photo: Japan's new finance minister - cautious one

Japan new finance minister showed himself rather cautious giving assessment of the nation's economic recovery Wednesday. But he urged the central bank to work with the government to keep growth going.

"It's desirable that the Bank of Japan will make policy in a way that is rational and consistent and stabilize the overall economy," said Finance Minister Fukushiro Nukaga, while noting the central bank is independent.

Nukaga, appointed by Prime Minister Shinzo Abe in a Cabinet reshuffle Monday, also said it's important for the government to try to keep exchange rates stable.

His cautious economic views come at a time the Bank of Japan is expected to raise interest rates before the end of the year.

Nukaga said, though, that Japan still had to watch out for deflation, a situation in which prices keep dropping, depressing wages and economic growth.

"We are not at the stage where we can say we're completely out of deflation," Nukaga said in an interview with Dow Jones Newswires and other media organizations.

Earlier this month, the central bank left its key short-term rates unchanged at 0.50 percent, and analysts expect it may stand pat next month as well, amid global market worries about the U.S. subprime mortgage crisis.

Bank of Japan Gov. Toshihiko Fukui has hinted that the bank wants to gradually raise rates.

Nukaga also indicated he won't rule out the possibility of Tokyo intervening in the currency markets to stabilize the yen.

"In principle, for the economy to continue stable growth, it's natural for a government to make efforts to ensure there won't be any excessive exchange-rate volatility," he said.

Japan has not intervened in currency markets for more than three years. The dollar has been plunging in recent weeks on concerns about U.S. credit woes.

A weak dollar tends to hurt Japanese growth by making Japanese exports more expensive and reducing the value of overseas earnings of Japan's major companies.

The U.S. dollar was trading at 114.37 yen late Wednesday in Tokyo, down from 114.56 yen Tuesday in New York. In July, the dollar traded at levels above 120 yen.