Bank of Japan Governor Masaaki Shirakawa said Monday the sharp deterioration in the global economy is starting to level out, but severe conditions are likely to continue for the time being and the recovery is likely to be only mild.

In a speech to local business leaders in Kanazawa, Ishikawa Prefecture, Shirakawa said the Japanese economy is likely to recover moderately from the latter half of fiscal 2009 on the back of the global recovery, noting recent signs of improvement in export and production due partly to demand recovery in China.

But caution on downside risks to the domestic economy would remain necessary as domestic demand, or spending by companies and consumers, is being adversely affected with a lag by a steep decline in production, he said.

“The sharp deterioration in economic and financial conditions in Japan and abroad since last autumn is starting to level out and there is the prospect of a mild recovery ahead,” Shirakawa said.

However, adjustments of various excesses that had accumulated worldwide over the past several years could take “considerable time,” he said, adding, “It is very likely that the severe economic conditions will continue for some time.” Read the rest of this entry »