Japan holds key rates at near zero to battle deflation
30 Apr 2010
1
Japan's central bank kept its key interest rates on hold near zero on Friday and said it would redouble efforts to boost the world's second-largest economy.
As widely expected, the Bank of Japan's policy board voted unanimously to leave its overnight call rate target at an ultra-low 0.1 per cent. The bank has not tweaked the rate since December 2008.
The central bank said it would keep monetary policy "extremely accommodative" to help fight deflation. Government data released Friday showed that consumer prices fell for the 13th straight month in March, and the bank said this is undermining the economy's recovery.
Board members agreed the central bank needed to do more to "contribute to strengthening the foundations for economic growth''.
As part of those efforts, Bank of Japan governor Masaaki Shirakawa has directed staff to find ways of financially supporting banks.
The central bank will release its semi-annual economic outlook report later today.
Japan had an economic growth of 0.9 per cent in the last three months of 2009. Such modest growth means that booming China is now vying with Japan to become the world's second largest economy.
"Japan's economy faces the critical challenge of overcoming deflation and returning to a sustainable growth path with price stability," the bank said. "It was confirmed at the meeting that, in the conduct of monetary policy, the bank would aim to maintain the extremely accommodative financial environment."
Many see overcoming deflation as key to Japan's efforts to secure strong economic growth. Japan has a history of struggling with deflation. The 1990s are often referred to as Japan's "lost decade" because of its 10-year struggle with falling prices.
Deflation is bad for an economy as it tends to make consumers and businesses delay major purchases in the expectation that prices will fall further in the future.
As widely expected, the Bank of Japan's policy board voted unanimously to leave its overnight call rate target at an ultra-low 0.1 per cent. The bank has not tweaked the rate since December 2008.
The central bank said it would keep monetary policy "extremely accommodative" to help fight deflation. Government data released Friday showed that consumer prices fell for the 13th straight month in March, and the bank said this is undermining the economy's recovery.
Board members agreed the central bank needed to do more to "contribute to strengthening the foundations for economic growth''.
As part of those efforts, Bank of Japan governor Masaaki Shirakawa has directed staff to find ways of financially supporting banks.
The central bank will release its semi-annual economic outlook report later today.
Japan had an economic growth of 0.9 per cent in the last three months of 2009. Such modest growth means that booming China is now vying with Japan to become the world's second largest economy.
"Japan's economy faces the critical challenge of overcoming deflation and returning to a sustainable growth path with price stability," the bank said. "It was confirmed at the meeting that, in the conduct of monetary policy, the bank would aim to maintain the extremely accommodative financial environment."
Many see overcoming deflation as key to Japan's efforts to secure strong economic growth. Japan has a history of struggling with deflation. The 1990s are often referred to as Japan's "lost decade" because of its 10-year struggle with falling prices.
Deflation is bad for an economy as it tends to make consumers and businesses delay major purchases in the expectation that prices will fall further in the future.
