Japan's central bank likely to maintain low interest rates at policy meeting
www.chinaview.cn 2009-12-17 15:54:28   Print

    TOKYO, Dec. 17 (Xinhua) -- The Bank of Japan (BOJ) began a two-day policy meeting on Thursday in which the organization will discuss how to tackle deflation and the strength of the yen.

    The BOJ has been under pressure from the government to do more to keep conditions in the economy from worsening, and on Dec. 1 injected 10 trillion yen in three-month loans for financial institutions at an interest rate of 0.1 percent.

    Given that the BOJ took this action two weeks ago, it is unlikely that the organization will choose to put in place further measures at the meeting.

    Since the money was injected into the economy, Japan has seen rates in money markets fall, contributing to a more liquid economy as the loaned money reaches the market.

    The BOJ is expected to maintain the banks key short-term interest rate at 0.1 percent in the meeting, as Governor Masaaki Shirakawa has repeatedly said that this is key to helping conditions improve in Japan.

    Of concern to the BOJ will be the December Tankan survey, which surveys major businesses on their current outlook on the economy. The survey this month showed that despite an improving outlook, major manufacturers plan to cut capital spending by 28.2 percent when compared with the previous year, which could lead to worsening deflation.

    Despite signs of a recovering economy in Japan, there are fears that the strength of the yen against the dollar, and deflation, could see conditions worsen. To tackle this, the government announced a new 7.2 trillion yen stimulus package on Dec. 8, and has called for the BOJ to do all it can to maintain momentum in the economy.

Editor: Wang Guanqun
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