Bank of Japan contemplates changing interest rates

by Richard Kilner

Story link: Bank of Japan contemplates changing interest rates

It is speculated that the Bank of Japan, which began a two-day meeting today, will not raise the country’s very low interest rates.

The prospect of a slowdown hitting both the US and Japan itself are thought to be the primary obstacles to an increase in rates.

Japan’s interest rate is just 0.5%, and has been at that level since February 2007.

Some believe that, far from raising rates, the bank may actually be considering cutting them despite Japan already having the lowest interest rate of any major economy.

Toshihiko Fukui, the Bank of Japan’s governor, has already warned that the economy will slow down in the near future, largely due to poor investment in the housing industry.

The Japanese economy should recover after the slowdown, Fukui has stated, though that could be dependent upon the state of the US economy.

Next week the US Federal Reserve may cut rates following its meeting, with the chairman hinting earlier that a cut of 50 basis points could be on the cards.

President George W Bush revealed a package of tax-cutting measures aimed at kickstarting the American economy last week, however it did not impress the Asian stockmarkets where shares have subsequently fallen.

Fukui has stated his desire to return Japan to an era of more usual interest rates.