The Bank of Japan said yesterday that it expects the world's No.2 economy to break decisively out of deflation by next year as it upgraded its forecasts to show 1.8 percent growth in the year to March 2007.
Monetary policy
In its twice-yearly economic outlook, the central bank said the chances of a change to its expansionary monetary policy were likely to increase from April.
But it said interest rates would remain "very low" for a period after the first change to its policy, under which it floods the financial system with cash to try to stem consumer price falls and stimulate growth.
The world's number two economy has been caught in the grip of deflation for more than seven years but is now on the road to recovery after a decade-long slump seen since Japan's "bubble economy" burst in the early 1990s.
The Bank of Japan says it is close to winning its long battle with deflation, which is considered damaging for an economy because it deters individuals from spending today rather than tomorrow and hits company profits.
Consumer prices
The central bank now expects consumer price changes to reach zero or turn positive toward the end of this year.
It sees a rise in core consumer prices of 0.1 percent in fiscal 2005, which ends in March next year, compared with a decline of 0.1 percent previously forecast.
Inflation is now expected to pick up to an annual pace of 0.5 percent in the fiscal year 2006 compared with an April forecast of 0.3 percent.
The Bank of Japan has vowed to continue to pump cash into the economy until deflation gives way to mild inflation as part of its near-zero interest-rate policy, which it left unchanged yesterday.
Based on its forecasts, the central bank said the possibility of a change to the present monetary policy framework was "likely to increase over the course of fiscal 2006."
But the Bank of Japan said it would be in no rush to raise interest rates after it changes its current policy of making funds of ?30 trillion to ?35 trillion (US$260 to US$300 billion) available to banks.
The report predicted "a period of very low short-term interest rates followed by a gradual adjustment to a level consistent with economic activity and price developments."
GDP growth
The central bank also raised its forecasts for GDP growth to 2.2 percent in fiscal 2005 from 1.3 percent previously, and to 1.8 percent in fiscal 2006 from 1.6 percent.
"Japan's economy continues to recover, having emerged from the temporary pause that began in the second half of 2004," the report said.
Overall economic activity had been more robust than predicted in April thanks to unexpectedly strong domestic private demand which more than offset lower-than-expected exports, it added.
The adjustments in production and inventory in technology-related sectors, which caused the economy's soft patch last year, appear to have run their course, the central bank said.
The government is aiming to recruit 1,096 foreign English teachers and teaching assistants this year, the Ministry of Education said yesterday. The foreign teachers would work closely with elementary and junior-high instructors to create and teach courses, ministry official Tsai Yi-ching (蔡宜靜) said. Together, they would create an immersive language environment, helping to motivate students while enhancing the skills of local teachers, she said. The ministry has since 2021 been recruiting foreign teachers through the Taiwan Foreign English Teacher Program, which offers placement, salary, housing and other benefits to eligible foreign teachers. Two centers serving northern and southern Taiwan assist in recruiting and training
WIDE NET: Health officials said they are considering all possibilities, such as bongkrekic acid, while the city mayor said they have not ruled out the possibility of a malicious act of poisoning Two people who dined at a restaurant in Taipei’s Far Eastern Department Store Xinyi A13 last week have died, while four are in intensive care, the Taipei Department of Health said yesterday. All of the outlets of Malaysian vegetarian restaurant franchise Polam Kopitiam have been ordered to close pending an investigation after 11 people became ill due to suspected food poisoning, city officials told a news conference in Taipei. The first fatality, a 39-year-old man who ate at the restaurant on Friday last week, died of kidney failure two days later at the city’s Mackay Memorial Hospital. A 66-year-old man who dined
EYE ON STRAIT: The US spending bill ‘doubles security cooperation funding for Taiwan,’ while also seeking to counter the influence of China US President Joe Biden on Saturday signed into law a US$1.2 trillion spending package that includes US$300 million in foreign military financing to Taiwan, as well as funding for Taipei-Washington cooperative projects. The US Congress early on Saturday overwhelmingly passed the Further Consolidated Appropriations Act 2024 to avoid a partial shutdown and fund the government through September for a fiscal year that began six months ago. Under the package, the Defense Appropriations Act would provide a US$27 billion increase from the previous fiscal year to fund “critical national defense efforts, including countering the PRC [People’s Republic of China],” according to a summary
‘CARRIER KILLERS’: The Tuo Chiang-class corvettes’ stealth capability means they have a radar cross-section as small as the size of a fishing boat, an analyst said President Tsai Ing-wen (蔡英文) yesterday presided over a ceremony at Yilan County’s Suao Harbor (蘇澳港), where the navy took delivery of two indigenous Tuo Chiang-class corvettes. The corvettes, An Chiang (安江) and Wan Chiang (萬江), along with the introduction of the coast guard’s third and fourth 4,000-tonne cutters earlier this month, are a testament to Taiwan’s shipbuilding capability and signify the nation’s resolve to defend democracy and freedom, Tsai said. The vessels are also the last two of six Tuo Chiang-class corvettes ordered from Lungteh Shipbuilding Co (龍德造船) by the navy, Tsai said. The first Tuo Chiang-class vessel delivered was Ta Chiang (塔江)