BOJ warns Japan faces new risks as population shrinks

TOKYO – The governor of Japan’s central bank has warned of unforeseen risks in guiding economic policy as the country’s population declines.

Bank of Japan Gov. Haruhiko Kuroda told fellow financial leaders Thursday that policies must be devised to prevent the shrinking population from hindering economic growth.

Since taking his post in April 2013, Kuroda has flooded Japan’s economy with cash through central bank asset purchases to help fight deflation and keep the economy growing.

He told a seminar that while the conventional strategy of controlling short-term interest rates is well understood, the unconventional methods the Bank of Japan has adopted can have unexpected consequences.

Kuroda said one of the potential pitfalls could be if banks use cheap credit to seek higher yielding, high-risk investments harmful to financial stability.