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Friday 19th of June 2009
June 16, 2009

Japan keeps interest rates at 0.1% and looks optimistic for the future


by Kay Murchie
”Japan

Japan’s economy looks set to be improving after it has experienced a rise in exports, production and public investment.

The export-dependent economy has been hit by a slump in demand for its products overseas, particularly cars and electrical goods but this looks set to change after the Bank of Japan (BoJ) said “the country’s economic conditions, after deteriorating significantly, have begun to stop worsening.”

The BoJ elected earlier this week to keep interest rates on hold at 0.1% but has not made any amendments to policies such as buying corporate bonds - part of a programme of quantitative easing (a way of injecting cash through to the economy).

The positive outlook for the world’s second largest economy comes after it was revealed that Japanese consumer confidence was up in May and a revised 5.9% rise in Japanese industrial output in April - the biggest gain in 50 years.

Many are now hoping the worst may be over in Japan since the April to June quarter is expected to see modest growth - for the first time in five quarters.

Shane Oliver, chief economist at AMP Capital Investors in Sydney, said: “We may be seeing a return to growth in Japan later this year so it is reasonable for the BoJ to upgrade its assessment now.”

However, a note of warning was issued by Masaaki Kanno, chief economist at JPMorgan Chase, who told Bloomberg News that the BoJ is “still cautious about the prospects for the economy and is still far away from an exit.”

In related news, at a meeting in Italy over the weekend for the Group of Eight (G8) industrialised nations, it was acknowledged that there are signs of stabilisation in the world’s leading economies.

G8 ministers said stock markets were rising, interest rates more stable, and consumer confidence was returning.

The G8 nations comprise the United States, Germany, Japan, Britain, France, Italy, Canada and Russia.

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