Wednesday, 16 November 2011

Smothered by a global slowdown, slammed by the floods in Thailand and unable to control the rise of the yen, Japan’s central bank brought down its assessment of the economy and kept its key interest at almost zero. The nine-member policy board of the Bank of Japan lowered its assessment of Japan’s economy at a two-day meeting and resolved to sustain the overnight call rate target at 0 to 0.1 percent.

The board described the economy as picking up but at a “more moderate pace mainly due to effects of a slowdown in overseas economies.” The main areas of concern were described as potential risks from the US and Europe’s debt crises and the ability of emerging economies to control inflation amid rapid growth.

The Bank of Japan said that at present the economy was vulnerable to adverse effects of global headwinds although it would be able to return to moderate growth eventually. Export-reliant Japan has been hit hard by the high value of the yen which reduces the value of repatriated overseas earnings. The yen is considered as a relatively safe haven by investors under the present economic circumstances.

Japan is also concerned about the recent trend of major exporters like Nissan and Panasonic to move part of their production out of Japan. The recent flooding in Thailand has also resulted in reduced production of major industries due to supply shortages.

Read More : Japan Central Bank Sustains Interest Rate at Near Zero Level 

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