By Leika Kihara

TOKYO, Oct 8 (Reuters)Bank of Japan Governor Haruhiko Kuroda said on Thursday the economy was starting to pick up and was likely to continue recovering thanks in part to the boost from fiscal and monetary stimulus measures.

While consumer prices will fall for the time being due to the impact of slumping oil prices, they are likely to rebound thereafter as the pandemic’s fallout on the economy eases, he said.

“Once the impact of the coronavirus pandemic subsides globally, Japan’s economy is likely to continue improving further as overseas economies resume steady growth,” Kuroda said in a speech to a quarterly meeting of the BOJ’s branch managers.

The upbeat view reinforces market expectations the BOJ will hold off ramping up stimulus for now, and focus on pumping money into the economy with existing lending programmes.

Kuroda said while Japan’s banking system remains stable as a whole, corporate funding conditions remain tight.

“We’ll monitor the impact of COVID-19 and won’t hesitate taking additional easing measures as needed,” he said.

Japan suffered its biggest economic slump on record in the second quarter as the pandemic crippled demand. Analysts expect any rebound to remain modest as fears of a second huge wave of infections weigh on consumption.

The BOJ expanded stimulus in March and April by ramping up asset buying and creating a new lending facility to ease corporate funding strains. It has kept policy steady since then.

(Reporting by Leika Kihara Editing by Chang-Ran Kim and Ana Nicolaci da Costa)

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