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Economic gloom slowing rapidly

TOKYO, January 16 – Japan\’s top central banker warned on Friday that the global economy was slowing rapidly as car giant Honda slashed more than 3,000 jobs and the Bank of America was thrown another financial lifeline.

Asian stock markets rallied as investors welcomed the latest 20-billion-dollar capital injection for Bank of America following its purchase of ailing brokerage firm Merrill Lynch.

But there was no let up in the seemingly relentless torrent of gloomy economic and corporate news.

Honda Motor Co. said it will not renew contracts with 3,100 temporary workers in Japan by the end of April as Fuji Heavy, the Japanese maker of Subaru brand vehicles, warned of its first annual loss in 15 years.

Bank of Japan governor Masaaki Shirakawa painted a bleak picture of the world economy.

"The global financial markets remain, on the whole, under heavy strain," Shirakawa said.

The global economy was "slowing down rapidly," he added.

Japan\’s central bank last month slashed interest rates to near zero to tackle a deepening recession in Asia\’s largest economy.

The Bank of Japan is reportedly considering spending two trillion yen (22 billion dollars) to buy commercial paper, a type of corporate debt, as it seeks new ways to ease a credit crunch.

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The BoJ is expected to formally decide on the measure when its policy board meets next week, the Nikkei business daily reported.

The US Federal Reserve has also introduced virtually free credit to fight the recession, but European Central Bank chief Jean-Claude Trichet on Friday ruled out zero interest rates in the eurozone.

The Bank of America injection, in exchange for preferred stock, is the second bailout it has received from the US Treasury\’s Wall Street rescue fund, the Troubled Assets Relief Program (TARP).

The bank, which bought Merrill as the credit crisis began to bite last year, will also get a 118-billion-dollar asset guarantee.

In return, it must meet strict restrictions on executive pay and compensation, and implement a mortgage loan modification programme.

"The objective of this programme is to foster financial market stability and thereby to strengthen the economy and protect American jobs, savings, and retirement security," the Treasury said.

Asian stock markets mostly rose on Friday as investors welcomed the Bank of America capital boost and hunted for bargains after the previous day\’s plunge.

Tokyo ended 2.58 percent higher, rebounding from a six-week low, while Seoul gained 2.15 percent and Sydney firmed 0.6 percent.

South Korea\’s Samsung announced a sweeping reshuffle among affiliates in an attempt to streamline its businesses.

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Investors now appear to be getting used to reports of gloomy corporate earnings outlooks, said Hideaki Higashi, equity strategist at SMBC Friend Securities.

"They have already factored in bad results for the year to March," he said.

But dealers said gains were capped by nervousness ahead of corporate earnings results in the United States and Japan that are expected to reflect the rapidly worsening business conditions in recession-hit major economies.

They said the market was likely to remain cautious until US president-elect Barack Obama takes office on Tuesday.

"It is difficult to take big positions until the inauguration of the new US president," said Higashi.

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