Following a worldwide plunge in stock markets, analysts believe the Bank of Japan (BoJ) may be forced to delay scrapping its zero interest rate policy in order to give the economy more room to recover.
Key to the outlook for monetary policy here will be whether Japan shows signs of being hit by an expected cooling of the US engine of economic growth as interest rates rise there to keep a lid on inflation, they said.
The Tokyo Stock Exchange's benchmark Nikkei-225 index tumbled 1,038.47 points or 6.58 percent to 14,750.84 last week in tandem with other global markets, nosediving over 3 percent on Thursday alone.
Japan's Economic and Fiscal Policy Minister Kaoru Yosano said a collapse in the stock market won't happen because the country is on a course for the longest economic expansion since the end of World War II.
``Stock prices are a mirror of the Japanese economy,'' Yosano said yesterday on Asahi TV's Sunday Project program. ``Looking at the growth rate, jobless rate, investment and consumer spending, there are no figures that show the Japanese economy is deteriorating. Rather, a common view is the economy will stay in good shape.''
As Nikkei crashed below 15,000 points for the first time for six months on fears that higher US interest rates will slam the brakes on global economic growth, the government urged the central bank to delay raising interest rates.
"We hope the Bank of Japan will support the economy with its monetary policies," Chief Cabinet Secretary Shinzo Abe told reporters. "We want the bank to do so by continuing with the zero interest rate policy."
Like many analysts, Dai-ichi Life Research Institute economist Hideo Kumano said the central bank would have to carefully weigh its next move.
"Given the sharp drop in stock markets, the Bank of Japan may have to be more cautious in its decision on when to lift the zero interest rate policy," Kumano said.
Market participants had speculated BoJ would lift its zero interest policy as early as next month but some are now rethinking that view, although many are still betting on a hike next month.
"The signal has now turned to amber [caution]," said Satoru Ogasawara, a strategist at Credit Suisse. "The BoJ has to diagnose whether the current declines in equities really reflect the outlook of a slowing world economy, or if they are only the result of position adjustment by investors."
He sees a 50 percent chance of an end to zero interest rates next month.
The recent rout in global stock markets has been sparked by worries over US inflation and slowing growth triggered by remarks from US Federal Reserve Chairman Ben Bernanke and his colleagues suggesting a hard line on inflation, dealers said.
"If the Fed has to continue hiking interest rates, while it sees a clear and present risk of a major deceleration in US economic growth, the BoJ may hesitate in following suit, because that could jeopardize the recovery of the Japanese economy," Daiwa Securities SMBC analyst Seiji Shiraishi said.
BoJ Deputy Governor Kazumasa Iwata last week dismissed concerns about falling stock markets, saying: "As investors' position adjustments calm down, the stock and bond markets will recover stability."
He also indicated that the bank would continue to move toward an end to its zero interest rate policy despite the stock market plunge.
However, some officials and investors are worried the BOJ could repeat its blunder of August 2000 when it lifted its zero interest rate policy too soon and helped snuff out a nascent recovery.
"The BoJ has a bad record of wrongly lifting its zero-interest policy in 2000 despite declines in stocks by focusing too much on economic fundamentals and ignoring fluctuations in stock prices," Kumano said.
A magnitude 7.8 earthquake struck off the southern coast of Mindanao in the Philippines at 7:38am today, prompting the US Tsunami Warning System to issue an alert for neighboring countries, including Taiwan. The system issued a purple alert indicating a "tsunami threat." The potential threat zone includes Taiwan, the Philippines, Papua New Guinea, Yap and Palau. Philippine authorities were assessing the damage from the quake, with the office of civil defense seeking to verifying initial reports that 15 people had been killed and 129 injured in the region, mostly from falling debris. Arlene Hollero, disaster chief of Maasim town in the Philippines' Sarangani Province,
‘GRAY ZONE’ PRESSURE: Beijing’s activities are intended to create the deceitful impression that China has jurisdiction over the area around Taiwan, the CGA said Taiwan’s rights over its territorial waters and exclusive economic zone must not be violated by any country, the Mainland Affairs Council said yesterday, adding that it will not accept any unprovoked actions. The council issued the remarks in response to the China Coast Guard conducting maritime enforcement drills near eastern Taiwan and claiming to fully exercise China’s maritime administrative law enforcement authority. The Coast Guard Administration (CGA) has been closely monitoring the situation and is taking concrete steps to defend the nation’s sovereignty and secure its waters, the council said. China has no sovereign rights over the waters off eastern
RESILIENCE: Taiwan plays a key role in semiconductors, energy, information infrastructure and advanced manufacturing, AIT Director Raymond Greene said Taiwan’s continued investment in deterrence and resilience remains vital, especially in uncrewed systems and other emerging technologies, American Institute in Taiwan (AIT) Director Raymond Greene said yesterday. Greene made the remarks at the annual National Strategic Summit on Supply Chain Resilience held by the Research Institute for Democracy, Society and Emerging Technology (DSET), a government-backed think tank. As Taiwan last year became the US’ fourth-largest trading partner and supply chain security is becoming more important, cooperation in emerging technologies continues to deepen between the two countries, he said. The US is committed to accelerating innovation, building key infrastructure, strengthening cooperation
RIGHT DIRECTION: Taiwan’s efforts to prevent forced labor include a proposal to ‘fully prohibit’ employers from withholding workers’ documents, an official said Taiwan is to establish a mechanism to restrict imports of goods linked to forced labor, the Executive Yuan said yesterday, after the US proposed imposing additional tariffs on Taiwanese goods over labor concerns. “The Ministry of Labor and the Ministry of Economic Affairs are to establish an interministerial review procedure,” Executive Yuan spokesperson Michelle Lee (李慧芝) said at a news briefing in Taipei. “The government is to use the Foreign Trade Act [貿易法] as the legal basis to restrict imports of goods produced with forced labor” and bring its supply chain governance more in line with international standards on human rights, resilience
RSS