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Dude, Where's My Economy?
TOKYO, Dec. 17 KYODO
The Bank of Japan will start its two-day policy meeting Thursday with market participants increasingly speculating that the central bank may cut its key interest rate, given the sharp appreciation of the yen and other factors.
The BOJ, which lowered its target for the cost of unsecured overnight borrowing between commercial banks to 0.3 percent from 0.5 percent in October, will announce its latest decision Friday.
Market participants are fueling speculation the BOJ may cut the key interest rate further to prop up the flagging Japanese economy by securing sufficient liquidity in financial markets.
The yen's appreciation against the U.S. dollar has added to such speculation.
In Tokyo on Wednesday, the dollar plunged to the lower 88 yen level, nearing a 13-year low.
The sharp fall came after the U.S. Federal Reserve cut its key interest rate Tuesday from 1 percent to a range of zero to 0.25 percent in a move that surprised market participants who had expected a smaller reduction.
As the rising yen hurts Japanese exports, the BOJ has been under growing pressure to lower interest rates and prevent the yen from gaining ground. Honda Motor Co. President Takeo Fukui said Wednesday after announcing a third downward revision to the carmaker's earnings forecasts for the current fiscal year that the government and the BOJ should take swift actions to stem the yen's surge so as to save Japan's export-oriented economy.
But there remains uncertainty over whether the central bank will actually ease credit conditions, with some senior BOJ officials pointing to the need for the bank to ''carefully study'' the effect of its October rate cut on the financial system and real economy.
However, there is also some doubt that the BOJ can resist demands from lawmakers, some of whom are also urging it to work out additional measures to support corporate financing.
The pressure has increased since the bank's closely watched Tankan business sentiment survey showed Monday that confidence among major Japanese manufacturers recorded the fastest deterioration in almost 34 years.
The Tankan result was ''very severe,'' BOJ Governor Masaaki Shirakawa told the Diet on Tuesday.
Options the BOJ may take include its outright purchase of commercial paper, or short-term debt issued by companies.
The move would be expected to help firms raise operating capital at a time when they have faced difficulty accumulating necessary funds through CP and other corporate debts due to the global credit crunch following the bankruptcy in September of U.S. investment bank Lehman Brothers Holdings Inc.
At present, the BOJ only accepts CP as collateral when lending to financial institutions under the condition that the institutions repurchase the debt from the central bank. Meanwhile, the Fed has introduced direct purchase of CP from U.S. companies.
==Kyodo
The Bank of Japan will start its two-day policy meeting Thursday with market participants increasingly speculating that the central bank may cut its key interest rate, given the sharp appreciation of the yen and other factors.
The BOJ, which lowered its target for the cost of unsecured overnight borrowing between commercial banks to 0.3 percent from 0.5 percent in October, will announce its latest decision Friday.
Market participants are fueling speculation the BOJ may cut the key interest rate further to prop up the flagging Japanese economy by securing sufficient liquidity in financial markets.
The yen's appreciation against the U.S. dollar has added to such speculation.
In Tokyo on Wednesday, the dollar plunged to the lower 88 yen level, nearing a 13-year low.
The sharp fall came after the U.S. Federal Reserve cut its key interest rate Tuesday from 1 percent to a range of zero to 0.25 percent in a move that surprised market participants who had expected a smaller reduction.
As the rising yen hurts Japanese exports, the BOJ has been under growing pressure to lower interest rates and prevent the yen from gaining ground. Honda Motor Co. President Takeo Fukui said Wednesday after announcing a third downward revision to the carmaker's earnings forecasts for the current fiscal year that the government and the BOJ should take swift actions to stem the yen's surge so as to save Japan's export-oriented economy.
But there remains uncertainty over whether the central bank will actually ease credit conditions, with some senior BOJ officials pointing to the need for the bank to ''carefully study'' the effect of its October rate cut on the financial system and real economy.
However, there is also some doubt that the BOJ can resist demands from lawmakers, some of whom are also urging it to work out additional measures to support corporate financing.
The pressure has increased since the bank's closely watched Tankan business sentiment survey showed Monday that confidence among major Japanese manufacturers recorded the fastest deterioration in almost 34 years.
The Tankan result was ''very severe,'' BOJ Governor Masaaki Shirakawa told the Diet on Tuesday.
Options the BOJ may take include its outright purchase of commercial paper, or short-term debt issued by companies.
The move would be expected to help firms raise operating capital at a time when they have faced difficulty accumulating necessary funds through CP and other corporate debts due to the global credit crunch following the bankruptcy in September of U.S. investment bank Lehman Brothers Holdings Inc.
At present, the BOJ only accepts CP as collateral when lending to financial institutions under the condition that the institutions repurchase the debt from the central bank. Meanwhile, the Fed has introduced direct purchase of CP from U.S. companies.
==Kyodo
Dude, Where's My Economy?
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