Japan’s central bank said yesterday it was extending its emergency measures to tackle the worst recession in decades, as it downgraded its outlook for the world’s No. 2 economy.
But the Bank of Japan said the worst of the slump appeared to be over and economic conditions “have stopped worsening.”
It held its key interest rate steady at 0.1 percent, as expected, and said it would continue its policy of buying up corporate debt to keep credit flowing to cash-strapped firms during the recession.
While there are signs of an improvement in the economy, GDP is expected to shrink 3.4 percent in the financial year to March next year, worse than a previous forecast for a contraction of 3.1 percent, it said.
The Bank also revised its outlook for the next financial year, predicting positive growth of 1 percent, against a previous projection of 1.2 percent.
It said the economy should start recovering from the second half of this financial year, supported by policymakers’ efforts to tackle the economic downturn and a credit crunch.
Japan entered recession in the second quarter of last year. The economy shrank at an annualized pace of 14.2 percent in the first quarter of this year, the worst performance on record, but recent data have indicated that exports and industrial production have begun to rebound.
At the same time concerns are growing about the prospect of another bout of deflation in Asia’s largest economy.
Consumer prices are expected to fall 1.3 percent this financial year and by 1 percent next year, the bank said.