Sat, Jul 15, 2006 - Page 12 News List

Central bank to monitor rate increase

BLOOMBERG

The central bank said it would "monitor closely" the effect on international financial markets of Japan's interest rate increase.

The bank made the comment in a statement after the Bank of Japan on Friday raised rates for the first time in almost six years by increasing the benchmark overnight rate between banks to 0.25 percent from almost zero.

Japan is Taiwan's second-biggest trading partner, accounting for 7.2 percent of the nation's exports and 23 percent of imports last month, according to a Ministry of Finance report issued on July 7.

The central bank did not elaborate on how it would monitor the situation. But on June 29, Central Bank Governor Perng Fai-nan (彭淮南) said interest rates were "still some distance away from a neutral level," after the authority raised its benchmark discount rate on 10-day loans to banks to 2.5 percent, the highest in almost five years.

The increase was aimed at helping "maintain stability in consumer prices," the authority said at the time.

The consumer price index rose 1.73 percent last month from a year earlier, the fastest in five months, the Directorate General of Budget, Accounting and Statistics reported on July 5.

The government's statistics agency said on May 18 that the nation's economic growth may slow to 4.26 percent in the third quarter from a projected 4.92 percent in the previous three months.

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