TOKYO (dpa-AFX) - Bank of Japan Governor Masaaki Shirakawa said Tuesday that authorities must pursue structural reforms, while central banks continue to buy time by providing liquidity and through other measures.
In a speech at the London School of Economics and Political Science, he said 'we need to bear in mind that providing liquidity as a lender of last resort is, in essence, a policy to buy time.'
'It is essential that the necessary structural reforms take place while time is being bought, as the time that we can buy becomes progressively more expensive,' Shirakawa said. 'There's a limit to what monetary policy can hope to achieve,' he added.
Referring to formation of bubbles in the economy, he said bubbles are not caused by low interest rates alone. But, when the expectation prevails that low interest rates will continue for a long period of time, it is likely to encourage leverage and maturity mismatching between the assets and liabilities of financial institutions.
Therefore in the conduct of monetary policy, the central banks need to be attentive to the accumulation of financial imbalances, the policymaker said.
Copyright RTT News/dpa-AFX