Bank of Japan makes first rate cut in seven years
As widely expected, the Bank of Japan has cut interest rates from 0.5% to 0.3%, the first since 2001.
According to analysts, some investors were disappointed that the bank had not cut rates further. There had been hopes of a 0.25% cut.
Commenting on the rate cut, the Bank of Japan said the impact of the global financial crisis had ‘further increased in severity‘. Meanwhile, the rate cut is also expected to bring stability to the yen.
The strong yen has had an impact on the profits of Japan’s exporters, with Fujitsu, Sony and Toyota all announcing disappointing second quarter profits this week.
The cut follows a wave of rate cuts around the world in a bid to stave off recession. On Wednesday, the US Federal Reserve cut interest rates 0.5% to 1%. Prior to the Fed’s announcement, interest rates were also cut in China and Norway.
Many analysts believe that the Bank of England and European Central Bank will follow suit next week with a 0.5% cut.
Japan, which has the lowest interest rates in the developed world, yesterday announced a second stimulus package for the country.
The 5 trillion yen (£31 billion, $51 billion) package is an attempt to stimulate the Japanese economy and include tax cuts, funding for care of children and the elderly and loans for small businesses.
The package is Japan’s second in as many months after the Prime Minister revealed a stimulus package worth 11.7 trillion yen at the end of August.
Following the news of the interest rate cut, Tokyo’s Nikkei index rose slightly but ended the day down 453 points at 8,577. Shares have soared by over 20% this week after hitting a 26-year low on Monday.
Visited 3095 times, 2 so far today
Comments (0)
Trackback URL | Comments RSS Feed
There are no comments yet. Why not be the first to speak your mind.