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Bank of Japan wraps up policy meet, may keep rates on hold at 0.5%

Bank of Japan wraps up policy meet, may keep rates on hold at 0.5%
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First Published: Tue, Apr 10 2007. 06 19 AM IST
Updated: Tue, Apr 10 2007. 06 19 AM IST
AP
Tokyo: Japan’s central bank is weighing recent price declines and concerns about the US economy as it wraps up a two-day policy meeting on 10 April amid market expectations that interest rates will stay unchanged.
In February, the Bank of Japan raised a benchmark interest rate to 0.5% from 0.25%.
But economists don’t expect another hike for awhile, because recent data showed that core consumer prices in February fell 0.1% from a year earlier, dipping for the first time in 10 months, partly because of a recent dip in oil prices.
That undermined hopes that Japan has fully escaped deflation, or the downward spiraling of prices that drags on wages and overall growth, despite other signs of growth, including rising corporate profits and expanding gross domestic product.
The Bank of Japan’s quarterly “tankan” survey, released a week ago, showed that confidence among manufacturers slipped in March for the first time in a year, even as it found that large businesses plan to boost investment in the year ahead.
Bank of Japan Deputy Governor Toshiro Muto has also pointed to nervousness about the US economy, Japan’s biggest export market.
“The US has both downside risks for the economy and upside risks for inflation,” he told reporters last week.
Although the Bank of Japan is in principle independent from the government, some analysts say the bank is unlikely to raise interest rates until after the nationwide parliamentary elections scheduled for July.
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First Published: Tue, Apr 10 2007. 06 19 AM IST
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