Bank of Japan Governor Masaaki Shirakawa on Monday stressed that the bank will continue monetary easing until its inflation target of 1 percent is in sight.

At the same time, the bank will also ascertain that if there is any significant risk to the sustainability of economic growth, including from the accumulation of financial imbalances, Shirakawa said in a speech at a business leaders' meeting in Nagoya.

According to him, the key to the overcoming of deflation lies in the extent to which firms and households actually make full use of current accommodative financial conditions.

Efforts to strengthen the economy's growth potential and support from the financial side are crucial for Japan's economy to "overcome deflation as early as possible", he added.

Shirakawa said the central bank is concerned that the appreciation of the yen could have adverse effects on Japan's economy, mainly through a decrease in exports and corporate profits as well as deterioration in business sentiment.

The bank is also worried if the yen's persistent strength would accelerate firms' efforts to shift production overseas or whether it would lead to a decline in medium- to long-term growth expectations.

In order to overcome deflation, the policymaker urged the government to raise the attractiveness of domestic investment through measures including decisive deregulation. "It is also important for the government to continue making efforts to ensure fiscal consolidation," he noted.

RTTNews