Bank of Japan keeps interest rates steady amid worries about global slowdown.
Japan's central bank kept interest rates steady Tuesday as widely expected amid lingering worries about a global slowdown. The seven-member policy board was unanimous in keeping the benchmark overnight call rate unchanged at 0.5 percent at the end of a two-day meeting, according to the Bank of Japan.
Soaring gas prices, rising material costs and signs of slower global growth are weighing on the world's second-largest economy, which depends heavily on exports. Economists predict that the Bank of Japan is likely to do nothing for about a year unless economic signs change dramatically.
Much of last year, market watchers had expected the BOJ would raise its key interest rate as Japan's economy gained steam. But the global economic turmoil set off at midyear by the U.S. subprime mortgage crisis scotched that view, and a jittery market began to expect a move in the opposite direction -- a rate cut.
The Japanese economy has proved remarkably solid recently. Last week, the government said the economy grew at a stronger-than-expected 3.3 percent annual pace in the first quarter, racking up its third consecutive quarter of growth. Still, economists warn that export growth could stumble if overseas economies falter, and domestic spending will probably stay weak if paychecks aren't growing.
Bank of Japan Gov. Masaaki Shirakawa, who took office last month, acknowledged energy and raw material costs are expected to stay high for some time. "We are looking closely at downside risks to the economy," Shirakawa told reporters, indicating that a rate hike was unlikely for some time.
The Bank of Japan echoed such sentiments in its economic report issued Tuesday, warning that the pace of the nation's growth was slowing because of the high prices of energy and raw materials. The language was similar to what the bank said the previous month.
Since 1999, Japan had kept interest rates generally at about zero to jump start a lagging economy. It ended its zero interest policy in July 2006 when it raised its key rate to 0.25 percent, the first hike in six years.
In a recent report, Lehman Brothers said expectations for an interest rate cut had also dwindled. The global economy was unlikely to worsen so much that pressure for a rate cut would rise, the investment bank said. A rate increase was unlikely until the latter half of next year, it said.
Japanese Finance Minister Fukushiro Nukaga said higher material and oil costs remain a challenge for the world economy. "The worst appears to be over for the global financial market, but recently rising oil and food prices are making economic policy management difficult," he said at a symposium in Tokyo.
Japan's central bank kept interest rates steady Tuesday as widely expected amid lingering worries about a global slowdown. The seven-member policy board was unanimous in keeping the benchmark overnight call rate unchanged at 0.5 percent at the end of a two-day meeting, according to the Bank of Japan.
Soaring gas prices, rising material costs and signs of slower global growth are weighing on the world's second-largest economy, which depends heavily on exports. Economists predict that the Bank of Japan is likely to do nothing for about a year unless economic signs change dramatically.
Much of last year, market watchers had expected the BOJ would raise its key interest rate as Japan's economy gained steam. But the global economic turmoil set off at midyear by the U.S. subprime mortgage crisis scotched that view, and a jittery market began to expect a move in the opposite direction -- a rate cut.
The Japanese economy has proved remarkably solid recently. Last week, the government said the economy grew at a stronger-than-expected 3.3 percent annual pace in the first quarter, racking up its third consecutive quarter of growth. Still, economists warn that export growth could stumble if overseas economies falter, and domestic spending will probably stay weak if paychecks aren't growing.
Bank of Japan Gov. Masaaki Shirakawa, who took office last month, acknowledged energy and raw material costs are expected to stay high for some time. "We are looking closely at downside risks to the economy," Shirakawa told reporters, indicating that a rate hike was unlikely for some time.
The Bank of Japan echoed such sentiments in its economic report issued Tuesday, warning that the pace of the nation's growth was slowing because of the high prices of energy and raw materials. The language was similar to what the bank said the previous month.
Since 1999, Japan had kept interest rates generally at about zero to jump start a lagging economy. It ended its zero interest policy in July 2006 when it raised its key rate to 0.25 percent, the first hike in six years.
In a recent report, Lehman Brothers said expectations for an interest rate cut had also dwindled. The global economy was unlikely to worsen so much that pressure for a rate cut would rise, the investment bank said. A rate increase was unlikely until the latter half of next year, it said.
Japanese Finance Minister Fukushiro Nukaga said higher material and oil costs remain a challenge for the world economy. "The worst appears to be over for the global financial market, but recently rising oil and food prices are making economic policy management difficult," he said at a symposium in Tokyo.
No comments:
Post a Comment