Tokyo Urges BoJ to Extend Crisis Measures
TOKYO Japan’s central bank faced pressure from the government on Tuesday to extend emergency measures aimed at helping cash-strapped firms survive the recession as it began a two-day policy meeting.
Although conditions in credit markets have improved, “it would be safer if the Bank of Japan kept the policy” of buying commercial paper and corporate bonds, Finance Minister Kaoru Yosano told reporters.
The bank has been buying up corporate debt in an effort to unblock a credit crunch brought on by a severe global financial crisis.
Investors are watching to see whether the BoJ will extend those measures, although analysts say a final decision may be delayed until August.
The BoJ is likely to continue the steps beyond September because “it is still not certain that a full-fledged recovery in final demand will materialise in the second half of fiscal 2009 amid the continuing severe financial conditions,” said Mari Iwashita, economist at Daiwa Securities SMBC.
“The financial markets appear calm at the moment and we do not believe the BoJ wants to wake a sleeping dog,” Iwashita added.
The bank is expected to keep its interest rates unchanged at 0.1 per cent on Wednesday. There is speculation that is may also upgrade its economic forecasts in light of recent signs of an improvement in the world’s number two economy.
BoJ governor Masaaki Shirakawa said last week that the worst of the recession appeared to be over.
“Japan’s economic conditions, after deteriorating significantly, have begun to stop worsening,” he told a meeting of BoJ branch managers.
The central bank meeting comes amid growing concerns about the prospect of another bout of deflation in Asia’s largest economy, where wholesale prices fell at the fastest pace on record in June, diving 6.6 per cent on the year.
Japan was stuck in a deflationary spiral for years after an economic bubble burst in the early 1990s, prompting consumers to put off purchases in the hope of further price drops and reducing corporate earnings.
Japan entered recession again in the second quarter of 2008 as its heavy dependence on overseas demand to drive its economic growth left it highly exposed to the global downturn.
Agence France-Presse
quoted from: Oman Tribune
Although conditions in credit markets have improved, “it would be safer if the Bank of Japan kept the policy” of buying commercial paper and corporate bonds, Finance Minister Kaoru Yosano told reporters.
The bank has been buying up corporate debt in an effort to unblock a credit crunch brought on by a severe global financial crisis.
Investors are watching to see whether the BoJ will extend those measures, although analysts say a final decision may be delayed until August.
The BoJ is likely to continue the steps beyond September because “it is still not certain that a full-fledged recovery in final demand will materialise in the second half of fiscal 2009 amid the continuing severe financial conditions,” said Mari Iwashita, economist at Daiwa Securities SMBC.
“The financial markets appear calm at the moment and we do not believe the BoJ wants to wake a sleeping dog,” Iwashita added.
The bank is expected to keep its interest rates unchanged at 0.1 per cent on Wednesday. There is speculation that is may also upgrade its economic forecasts in light of recent signs of an improvement in the world’s number two economy.
BoJ governor Masaaki Shirakawa said last week that the worst of the recession appeared to be over.
“Japan’s economic conditions, after deteriorating significantly, have begun to stop worsening,” he told a meeting of BoJ branch managers.
The central bank meeting comes amid growing concerns about the prospect of another bout of deflation in Asia’s largest economy, where wholesale prices fell at the fastest pace on record in June, diving 6.6 per cent on the year.
Japan was stuck in a deflationary spiral for years after an economic bubble burst in the early 1990s, prompting consumers to put off purchases in the hope of further price drops and reducing corporate earnings.
Japan entered recession again in the second quarter of 2008 as its heavy dependence on overseas demand to drive its economic growth left it highly exposed to the global downturn.
Agence France-Presse
quoted from: Oman Tribune
