BOJ Gov Shirakawa: Acknowledge Risk Of Keeping Rates Low For Too Long

TOKYO -- Bank of Japan Gov. Masaaki Shirakawa on Monday acknowledged the risk of keeping interest rates low for too long, pointing to the U.S.'s possible vulnerability to such risks.

"If the continuation of low interest rates (in the U.S.) leads to a substantial rise in long-term interest rates by raising inflation expectations or by generating expectations for a weak dollar, this may give rise to another problem, namely that the fiscal burden increases and in turn the need for adjustments in the government's balance-sheet arises," Shirakawa said at the Paris EUROPLACE forum in Tokyo.

The U.S. Federal Reserve has kept its policy target rate in a 0% to 0.25% range since December. The Japanese central bank too has kept its target rate ultra-low since December, at 0.1%.

The BOJ chief added balance-sheet adjustment in U.S. and European economies is "a key issue in determining the outlook for the global economy."

As for prices, Shirakawa said it is not appropriate to judge price stability solely by short-term moves in the consumer price index, but the central bank must look at medium- and long-term developments.

In late October, the BOJ said in its latest outlook report that the nation's CPI may stay in negative territory for at least this and the next two fiscal years.