US recession may become longest since WWII: Shirakawa

TOKYO: The current recessionary phase in the United States could be the longest for the US economy since the end of World War II, Bank of Japan Governor Masaaki Shirakawa said on Monday.

The world's largest economy could shrink for a longer period than the 16-month contractions seen between 1973 and 1975, and 1981 and 1982, Shirakawa said in a speech, warning that the US slump could further slow down the Japanese and other major economies.

The US economy is widely expected to show signs of recovery during the latter half of 2009, but the central bank chief added, "It is not that we have been given any decisive reason" to firmly believe that assessment.

"I think...the current difficult environment will continue," Shirakawa said at a meeting of the Japan Business Federation, the nation's most powerful business lobby.

The BOJ cut its key short-term interest rate to 0.1 per cent from 0.3 per cent Friday to boost the flagging Japanese economy and took additional emergency measures to facilitate corporate financing amid the global financial turmoil.

Today, however, Shirakawa reiterated that Japanese credit conditions have become less accommodative even as the benchmark overnight borrowing rate between banks has been set at an extremely low level.

In order for interest rate policy to become effective again in stimulating the economy, "it is extremely important to take measures designed to maintain an environment where the effect of credit-easing policies could get through" to the financial system, Shirakawa said.