Bank of Japan sees recession easing

May 22, 2009
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, TOKYO, May 22 – Japan\’s worst post-war recession appears to be easing, the central bank said on Friday, upgrading its assessment of the world\’s number two economy for the first time in almost three years.

The Bank of Japan (BoJ) also left its key interest rate unchanged at 0.1 percent at a two-day meeting, as widely expected.

And it expanded the type of debt it will accept from banks in return for emergency funds to include bonds issued by the governments of the United States, Britain, Germany, and France.

With little room left to reduce rates further, the BoJ is turning to alternative tools to spur lending.

Japan\’s economy logged its sharpest contraction on record in the three months to March, shrinking 4.0 percent compared with the previous quarter.

But the BoJ said the recession appeared to be abating.

"Economic conditions have been deteriorating, but exports and production are beginning to level out," it said in a statement.

"Going forward, although domestic private demand is likely to continue to weaken, exports and production, after levelling out, are expected to start recovering and public investment to increase.

"Therefore, the pace of deterioration in economic conditions is likely to moderate gradually, leading to a levelling out of the economy," it said.

The assessment was brighter than its April view that economic conditions had "deteriorated significantly," marking the first upgrade since July 2006.

Japan — which suffered a decade-long economic slump in the 1990s — posted an unprecedented fourth straight quarter of negative growth in the three months to March.

Japan\’s exporters have been hit particularly hard by the current global recession because they produce big ticket items such as cars and televisions that are typically bought on credit by consumers in developed nations.

The country\’s auto and high-tech giants have announced massive job cuts in recent months as they sink deep into the red due to the slump in exports.

But most analysts think the economy will stabilise in the current quarter, possibly even returning to positive growth. Exports and factory output both rose slightly in March from the previous month.

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