Bank Of Japan Chief Pledges Continued Low-Rate Policy To G-20
By Takashi Nakamichi, Of DOW JONES NEWSWIRES
ST. ANDREWS, Scotland -(Dow Jones)- The Bank of Japan's governor told Group of
20 officials Saturday the central bank will "patiently" support the nation's
economy through a loose monetary policy, the latest indication it may keep
interest rates at a rock-bottom 0.1% for a long time.
While the remarks of Masaaki Shirakawa aren't anything new, the fact he made
that pledge during a high-profile meeting of G-20 finance ministers and central
bank chiefs underscores his determination to continue the current interest-rate
policy until Japan's economic recovery firmly takes root.
"I said (during the G-20 gathering Saturday) that we will continue our
extremely accommodative monetary policy to patiently support the economy so that
it will get back on a sustainable growth track accompanied by stable prices,"
Shirakawa said at a news conference held after a two-day G-20 gathering.
BOJ officials, including Shirakawa, have said little about when they may start
pushing rates higher. But many analysts speculate that monetary tightening is
unlikely to come before early 2011.
Pressure on the BOJ to keep borrowing costs low to spur economic activity has
been building recently as Japan's economy slips deeper into deflation, a climate
in which falling prices threaten growth. The nation's weak job market also keeps
some policy makers on alert for a potential "double-dip"--a return to recession
after a brief period of recovery.
"I've told (the G-20 members) we Japanese are not at the stage of withdrawing"
stimulus measures taken to counter the nation's worst post-war slump, said
Senior Vice Finance Minister Yoshihiko Noda, who was also spoke at the same news
conference. "The Japanese economy is regaining strength. Still, its recovery has
little self-sustainability, while its employment conditions remain severe ... we
need to pay sufficient attention regarding whether the current economic pickup (
in Japan) would boost private-sector demand and lead to improvement in the jobs
market."
Unlike the central banks of Norway and Australia, which have begun lifting
rates to head off inflation as their economies recover from the global downturn,
the BOJ is expected to become busy fighting deflation caused by weak domestic
demand from Japan's economic slump as well as weakened overseas demand for its
exports.
In its latest semiannual report, released late last month, the BOJ predicted
that core consumer prices will drop by 1.5% in the fiscal year ending in March.
It also projected further declines in the following two fiscal years of 0.8% and
0.4%, respectively.
Even though the bank is set to scrap emergency steps aimed at helping cash-
starved firms in the coming months, such a forecast suggested it is far from
ready to raise rates, a step that could have a much broader impact on Japan's
economy.
-By Takashi Nakamichi, Dow Jones Newswires; 813-6895-7558; takashi.nakamichi@
dowjones.com
(END) Dow Jones Newswires
11-07-091646ET
Copyright (c) 2009 Dow Jones & Company, Inc.
|