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Wednesday 19th of January 2011
November 5, 2010    

Bank of Japan keeps interest rates at record low

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by Kay Murchie

The Bank of Japan (BoJ) has today left interest rates at almost zero, in a bid to boost the economy and continue its battle deflation.

The move follows its surprise decision last month to cut interest rates to this level.

The Japanese recovery has been faltering of late and exports, a crucial driver for economic growth, continue to slow.

In addition, a strong yen could be damaging for the economy. A stronger yen has meant demand for exports has weakened.

The Bank recently took action to weaken the currency – it was the first time in six years that such action had been taken.

Meanwhile, the Bank of Japan’s two-day meeting was brought forward by 10 days in order to take place shortly after the Federal Reserve’s meeting.

This was so the Bank could respond to any measures the US central bank decided to adopt as the Japanese yen continues to strengthen against the dollar.

However, the BoJ did not elect to introduce any fresh stimulus measures. However, the Bank has said that the sluggish US economy remains a threat to growth despite momentum in emerging nations.

The Fed, meanwhile, announced on Wednesday it would introduce a fresh round of stimulus.

The move was widely expected after concerns for the US economic recovery amid low inflation and rising unemployment.

The Federal Open Market Committee (FOMC) has agreed to inject an additional $600 billion (£373 billion), albeit higher than the $500 billion expected by many economists.

The move will see the bank buy up Treasury debt at a rate of $75 billion a month – a policy which has been branded “QE2“ (quantitative easing).

In other news this week, the Bank of England and the European Central Bank both elected to keep interest rates at the record low of 0.5% and 1% respectively.

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