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TOKYO, JAPAN - BANK of Japan governor Masaaki Shirakawa said on Wednesday the United States dollar will remain the world's key currency for the foreseeable future despite the current global financial turmoil.
His comments were in response to a question about what central banks, which issue other major currencies, would do if trust in the dollar was undermined.
'I don't know if it will hold true in a distant future. But I think the dollar will remain the key currency for some time,' Mr Shirakawa said after delivering a speech at the University of Tokyo, his alma mater.
A number of economists have warned that the downturn in the global economy could spell an end for the dollar-based currency regime.
Meanwhile, on the possibility of Japan returning to near-zero interest rates, Mr Shirakawa said his bank would continue to study 'both the merits and side effects' of such a move.
The Bank of Japan maintained the easy-money policy for five years until March 2006 by flooding the financial system with liquidity in order to peg the interest rate to near zero.
'This policy was meaningful when there was strong anxiety over the financial system,' he said. 'But if it is continued after the financial system was settled, financial markets could not function to the full.'
The Bank of Japan slashed its benchmark interest rate to 0.3 per cent from 0.5 per cent in October for its first rate cut in seven years to tackle the recession. But it left the main rate unchanged at its policy meeting on November 21.
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