Bank of Japan Holds Key Interest Rate at 0.5 Percent Amid Worries About US, Global Economy.
Japan's central bank voted unanimously to leave its benchmark interest rate unchanged at 0.5 percent Tuesday, amid steep drops in global stocks and jitters about a U.S. economic slowdown. The Bank of Japan's policy-making body voted 9-0 to make no change at the end of a two-day meeting, the bank said in a statement.
The decision was widely expected as share prices plunged across the world and worries deepened over the health of the U.S. economy. Japan's benchmark Nikkei 225 index lost 5.65 percent Tuesday after dropping 3.9 percent Monday. Shares in other Asian nations also extended losses for a second straight day.
BOJ Gov. Toshihiko Fukui said Tuesday that the U.S. subprime-mortgage crisis was having a greater impact than expected on Japan. His remarks were taken as a sign that the central bank's stance on the Japanese economy has grown more bearish.
Later Tuesday, Fukui said he did not expect the problems in the U.S. housing market to end anytime soon, adding that the U.S. economy was likely to slow further through the first two quarters of 2008.
While Japan's economy remains on a path to recovery, the bank must closely watch moves in the U.S. and European financial markets, he said. "The probability that Japan's economy will continue to grow remains high," Fukui told reporters. "As for the financial situation in the background, my understanding is that we are entering a delicate phase that calls for making careful judgements about what lies ahead."
In its monthly economic report, the bank said the nation's economic performance has been weaker than what it forecast in its semiannual report in October, mainly due to a recent drop in housing investment and cautious corporate sentiment. But it left unchanged its view of the state of Japan's economy, saying it was expanding moderately as a trend though slowing due to the housing investment decline.
The bank had downgraded its assessment for the first time in three years in December. It had previously said Japan's economy was expanding moderately, without qualification. BOJ's policy makers left the unsecured overnight call loan rate -- the basic policy interest rate -- unchanged at 0.5 percent, the lowest among Group of Seven industrialized nations.
Many market players believe the BOJ won't be able to raise rates again until at least the middle of the year. It was the second month in a row that the board voted unanimously to leave rates on hold. On Jan. 15, the BOJ cut its core assessment of Japan's regional economies, the first such downgrade since the BOJ began publishing its regional "Sakura Report" in April 2005.
Japan's central bank voted unanimously to leave its benchmark interest rate unchanged at 0.5 percent Tuesday, amid steep drops in global stocks and jitters about a U.S. economic slowdown. The Bank of Japan's policy-making body voted 9-0 to make no change at the end of a two-day meeting, the bank said in a statement.
The decision was widely expected as share prices plunged across the world and worries deepened over the health of the U.S. economy. Japan's benchmark Nikkei 225 index lost 5.65 percent Tuesday after dropping 3.9 percent Monday. Shares in other Asian nations also extended losses for a second straight day.
BOJ Gov. Toshihiko Fukui said Tuesday that the U.S. subprime-mortgage crisis was having a greater impact than expected on Japan. His remarks were taken as a sign that the central bank's stance on the Japanese economy has grown more bearish.
Later Tuesday, Fukui said he did not expect the problems in the U.S. housing market to end anytime soon, adding that the U.S. economy was likely to slow further through the first two quarters of 2008.
While Japan's economy remains on a path to recovery, the bank must closely watch moves in the U.S. and European financial markets, he said. "The probability that Japan's economy will continue to grow remains high," Fukui told reporters. "As for the financial situation in the background, my understanding is that we are entering a delicate phase that calls for making careful judgements about what lies ahead."
In its monthly economic report, the bank said the nation's economic performance has been weaker than what it forecast in its semiannual report in October, mainly due to a recent drop in housing investment and cautious corporate sentiment. But it left unchanged its view of the state of Japan's economy, saying it was expanding moderately as a trend though slowing due to the housing investment decline.
The bank had downgraded its assessment for the first time in three years in December. It had previously said Japan's economy was expanding moderately, without qualification. BOJ's policy makers left the unsecured overnight call loan rate -- the basic policy interest rate -- unchanged at 0.5 percent, the lowest among Group of Seven industrialized nations.
Many market players believe the BOJ won't be able to raise rates again until at least the middle of the year. It was the second month in a row that the board voted unanimously to leave rates on hold. On Jan. 15, the BOJ cut its core assessment of Japan's regional economies, the first such downgrade since the BOJ began publishing its regional "Sakura Report" in April 2005.
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