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Bank of Japan warns about US impasse consequences

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The Bank of Japan (BOJ) has warned about the ‘severe’ consequences for the global markets of a protracted budget deadlock in the United States.

The US budget standoff and concerns about an unprecedented Washington debt default have caused Tokyo shares to drop and boosted the yen.

BOJ Governor Haruhiko Kuroda said on Friday that “If this continues for a long time, this could destabilize financial markets and worsen sentiment.”

Kuroda further expressed the BOJ readiness to respond to any unexpected shocks, adding that the consequences of a prolonged US stalemate for global markets would be “severe.”

“We sincerely hope a solution is reached at an early date.”

Other senior international policymakers have warned that if the US fails to raise its debt ceiling before mid-month, the move would deal a serious blow to the world economy.

Japanese Finance Minister Taro Aso on Friday referred to the October 17 deadline, by which time the US administration needs to increase the nation’s debt ceiling, saying “my feeling is… the debt limit will have an internationally significant impact. Unless it is resolved swiftly, we will see various consequences.”

Japan is one of the main holders of the US government debt.

The US federal government is expected to exhaust its cash reserves by October 17 and if US lawmakers do not reach an agreement on the debt ceiling, the government will not be able to pay its bills and will default on its legal obligations.

US President Barack Obama has called off his tour to Asia to remain in his country and deal with the crisis.

Obama is engaged in a dispute with the Republican-controlled Congress as lawmakers say the passage of the budget bill is dependent on a delay in the implementation of the ‘Obamacare,’ which is a law that requires all Americans to have health insurance.

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