Japan’s worst post-war recession appears to be easing, the central bank said yesterday, upgrading its assessment of the world’s No. 2 economy for the first time in almost three years.
The Bank of Japan (BoJ) also left its key interest rate unchanged at 0.1 percent at a two-day meeting, as widely expected and it expanded the type of debt it will accept from banks in return for emergency funds to include bonds issued by the governments of the US, Britain, Germany and France.
With little room left to reduce rates further, the BoJ is turning to alternative tools to spur lending.
Japan’s economy logged its sharpest contraction on record in the three months to March, shrinking 4 percent compared with the previous quarter, but the BoJ said the recession appeared to be abating.
“Economic conditions have been deteriorating, but exports and production are beginning to level out,” it said in a statement. “Going forward, although domestic private demand is likely to continue to weaken, exports and production, after leveling out, are expected to start recovering and public investment to increase. Therefore, the pace of deterioration in economic conditions is likely to moderate gradually, leading to a leveling out of the economy.”
The assessment was brighter than last month’s view that economic conditions had “deteriorated significantly,” marking the first upgrade since July 2006.
Japan — which suffered an economic slump in the 1990s — posted an unprecedented fourth straight quarter of negative growth in the three months to March.
Japan’s exporters have been hit particularly hard by the current global recession because they produce big ticket items such as cars and televisions that are typically bought on credit by consumers in developed nations.
The country’s auto and high-tech giants have announced massive job cuts in recent months as they sink deep into the red because of the slump in exports.
But most analysts think the economy will stabilize in the current quarter, possibly even returning to positive growth. Exports and factory output both rose slightly in March from the previous month.
Meanwhile, Tokyo has no plans to step into the currency markets to prop up the US dollar, Japan’s finance minister said yesterday, as the yen rose to a new two-month high against the greenback.
“We aren’t at all thinking about intervening in the foreign exchange markets at this point,” Kaoru Yosano told reporters, adding the government was analyzing what is driving the yen higher.
The dollar was trading at ¥93.96 in Tokyo early morning trade, its lowest level since March 19, compared with ¥94.42 in New York late on Thursday.
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