DAVOS, Switzerland

Bank of Japan Governor Haruhiko Kuroda said on Friday the economy likely suffered a contraction in the final quarter of last year, largely due to the hit to factory output from a string of typhoons that struck the country.

As a country prone to natural disasters, Japan must do more to mitigate the risks associated with climate change, he added.

"In the fourth quarter of last year, the Japanese economy had negative growth ... largely because of two typhoons. Natural disasters are really intensifying in Japan," Kuroda told a seminar at the World Economic Forum annual meeting in Davos.

"I think the Japanese economy is one of the most energy efficient (in the world). But I still think (Japan) must do more to reduce emissions" and continue to mitigate the risk from climate change, he added.

On Japan's economy, Kuroda repeated his view that it remained on a moderate expansionary trend thanks to robust capital expenditure and rising household income.

While warning that a prolonged low-interest rate environment could have negative effects on the country's banking system, Kuroda stressed the BOJ's resolve to maintain its massive stimulus program.

"Certainly, a low interest rate situation prevailing for so long a time, including negative interest rates, means that there might be some side-effects on the financial system," Kuroda said.

"We have been carefully monitoring the financial sector and financial markets. So far, we have not seen any kind of financial bubble or financial excess," he said.

Reuters