Bank of Japan Governor Haruhiko Kuroda said Dec. 26 it was critical to watch out for excessive risk-taking as the country continues to expand.
"In the current recovery phase, although no signs of excessively bullish expectations are observed in asset markets and financial institutions' behavior so far, developments in financial conditions also continue to warrant close attention," Kuroda said in a speech at a meeting of business lobby Keidanren.
Kuroda said the BOJ will continue to "persistently pursue powerful monetary easing" given that prices have not risen as fast as one would expect in the backdrop of economic expansion and a tight labor market. He expects the Japanese economy — which the government projects to grow at an upwardly revised 1.9% in the current fiscal year and 1.8% in the next — to continue expanding "firmly" and labor market conditions to tighten further.
The central bank governor added that he does not share the view that labor shortages will constrain Japan's growth, as firms have in the past raised productivity during the process of overcoming labor shortages.
Meanwhile, he said Japan's economy is no longer in deflation.
"There are some firms that have shaken off the deflationary mindset and have proactively embarked on new initiatives," he said. "When more firms follow suit, this will give rise to a virtuous cycle in the economy as a whole, with prices rising moderately as wages and productivity increase, leading to sustainable economic growth."