The Bank of Japan (BOJ) cut its super-low interest rates yesterday for the first time in seven years, warning that Asia’s largest economy will barely grow this year because of the financial crisis.
The BOJ joined a rate-cutting campaign by central banks around the world, reducing its key lending rate by 20 basis points to 0.3 percent to try to calm volatile markets and ward off a deep recession.
But investors appeared unimpressed. Tokyo’s Nikkei index tumbled 5 percent in the wake of the cut, which was slightly smaller than markets had expected.
PHOTO: AFP
The final decision was taken by BOJ Governor Masaaki Shirakawa as the policy board was evenly split on whether to support the move.
The BOJ also decided to start paying interest on commercial bank reserves held on account as part of efforts to ease pressure in the money market.
The bank said that the fallout from financial crises in the US and Europe had become more severe.
“Increased sluggishness in Japan’s economic activity will likely remain over the next several quarters with exports leveling off and the effects of earlier increases in energy and materials prices persisting,” it said.
It was the first interest rate cut by the Japanese central bank since March 2001, when it introduced an unprecedented policy of almost free credit to try to pull the economy out of the deflationary doldrums.
The Japanese economy shrank in the second quarter of this year and a slew of gloomy economic data since then has reinforced fears of a prolonged downturn.
The BOJ slashed its economic outlook, predicting tepid growth of 0.1 percent in the current fiscal year to March and 0.6 percent next year.
“The Japanese economy is still in the early stages of tough times as exports are expected to start declining from now on,” said Masahiko Hashimoto, an analyst at Daiwa Institute of Research.
“The expected export slump will squeeze corporate earnings and then hit household spending and the job market,” Hashimoto said.
Central banks in the US, China, Hong Kong and Taiwan have lowered borrowing costs this week as part of efforts to avert a financial meltdown.
Speculation is growing that the European Central Bank and the Bank of England could announce fresh interest rate cuts next week.
But analysts said the rate cut in Japan would be largely symbolic as borrowing costs were very low even before the cut.
“Unlike the United States and Europe, where rates have already been reduced, a rate cut in Japan will probably do little to stimulate the economy,” said professor Teizo Taya of Rikkyo University, a former member of the BOJ board.
Until a few months ago the Bank of Japan had been eyeing an interest rate hike, but worries about inflation have since been replaced by fears of a deep global recession because of the credit crunch.
Japanese inflation slowed to 2.3 percent in September from a decade high of 2.4 percent in August, official figures showed yesterday.
Unemployment slid to 4 percent in September from 4.2 percent in August, but the drop was mainly attributed to a shrinking work force. Housing spending fell 2.3 percent from a year earlier, down for a seventh straight month.
“Japan probably is already in recession,” said Eisuke Sakakibara, a former top finance ministry official who earned the nickname “Mr Yen” for his influence over currency markets.
“This is a simultaneous, worldwide recession, which could [last] for quite a long time,” said Sakakibara, now a professor at Waseda University.
AIR SUPPORT: The Ministry of National Defense thanked the US for the delivery, adding that it was an indicator of the White House’s commitment to the Taiwan Relations Act Deputy Minister of National Defense Po Horng-huei (柏鴻輝) and Representative to the US Alexander Yui on Friday attended a delivery ceremony for the first of Taiwan’s long-awaited 66 F-16C/D Block 70 jets at a Lockheed Martin Corp factory in Greenville, South Carolina. “We are so proud to be the global home of the F-16 and to support Taiwan’s air defense capabilities,” US Representative William Timmons wrote on X, alongside a photograph of Taiwanese and US officials at the event. The F-16C/D Block 70 jets Taiwan ordered have the same capabilities as aircraft that had been upgraded to F-16Vs. The batch of Lockheed Martin
GRIDLOCK: The National Fire Agency’s Special Search and Rescue team is on standby to travel to the countries to help out with the rescue effort A powerful earthquake rocked Myanmar and neighboring Thailand yesterday, killing at least three people in Bangkok and burying dozens when a high-rise building under construction collapsed. Footage shared on social media from Myanmar’s second-largest city showed widespread destruction, raising fears that many were trapped under the rubble or killed. The magnitude 7.7 earthquake, with an epicenter near Mandalay in Myanmar, struck at midday and was followed by a strong magnitude 6.4 aftershock. The extent of death, injury and destruction — especially in Myanmar, which is embroiled in a civil war and where information is tightly controlled at the best of times —
Taiwan was ranked the fourth-safest country in the world with a score of 82.9, trailing only Andorra, the United Arab Emirates and Qatar in Numbeo’s Safety Index by Country report. Taiwan’s score improved by 0.1 points compared with last year’s mid-year report, which had Taiwan fourth with a score of 82.8. However, both scores were lower than in last year’s first review, when Taiwan scored 83.3, and are a long way from when Taiwan was named the second-safest country in the world in 2021, scoring 84.8. Taiwan ranked higher than Singapore in ninth with a score of 77.4 and Japan in 10th with
SECURITY RISK: If there is a conflict between China and Taiwan, ‘there would likely be significant consequences to global economic and security interests,’ it said China remains the top military and cyber threat to the US and continues to make progress on capabilities to seize Taiwan, a report by US intelligence agencies said on Tuesday. The report provides an overview of the “collective insights” of top US intelligence agencies about the security threats to the US posed by foreign nations and criminal organizations. In its Annual Threat Assessment, the agencies divided threats facing the US into two broad categories, “nonstate transnational criminals and terrorists” and “major state actors,” with China, Russia, Iran and North Korea named. Of those countries, “China presents the most comprehensive and robust military threat
RSS