TOKYO, Nov. 4 (Xinhua) -- Bank of Japan (BOJ) Governor Masaaki Shirakawa said on Wednesday that the Japanese economy will experience deflation for the foreseeable future, but that the situation will improve, albeit at a slow pace.

    "Downward pressure on prices is likely to remain for a relatively long period," Shirakawa said at a speech at the Kisaragi-kai meeting in Tokyo. The BOJ governor argued that as demand for goods from overseas has declined since the credit crisis that originated in the United States, both Japanese manufacturers and workers have seen conditions decline, which in turn has led to less demand for goods, forcing prices down.

    Shirakawa argued, however, that the situation will improve as the U.S. and Europe take steps to balance their books, and as emerging economies continue to pick up. "What would be important for the global economy is that both the advanced economies and the emerging economies grow together in a well-balanced and sustainable manner without relying too much on each other," he said.

    The BOJ governor also said that Japan would keep interest rates at 0.1 percent for the foreseeable future, in order to keep the economic recovery on track. "The Bank will maintain the extremely accommodative financial environment and thereby provide steady support for Japan's economy to return to a sustainable growth path with price stability," he said.

    He also noted, that while the bank was going to withdraw from credit markets in December, it will not be moving to a laissez-faire approach on handling the economy. "In the conduct of monetary policy, the Bank will provide steady support for Japan's economy to return to a sustainable growth path with price stability," he said.

    In concluding the speech, Shirakawa said that while there will always be downturns and risks, he felt that through working together, it would be possible to overcome them. "By exchanging views with the policy authorities at home and abroad, market participants, and academics, and continuing to learn humbly, the Bank of Japan will meet such new challenges," he said.

Special Report:  Global Financial Crisis