Japan's economy slowing on drop in housing investment, central bank official says
The pace of Japan's economic growth is slowing due to a big drop in housing investment and the slowdown is likely to persist for some time, a senior central bank official said in a speech on Thursday.
TOKYO: The pace of Japan's economic growth is slowing due to a big drop in housing investment and the slowdown is likely to persist for some time, a senior central bank official said in a speech on Thursday.
The nation's economic cycle is weakening now but the cycle itself remains intact,'' said Toshiro Muto, one of the Bank of Japan's two deputy governors.
However, looking ahead, the economy will keep expanding in the future,'' he told business leaders in Sapporo in northern Japan.
Muto's remarks echoed the bearish economic assessment made by BOJ Governor Toshihiko Fukui in December after the bank's policy body voted unanimously to leave its benchmark interest rate unchanged at 0.5 per cent.
Housing investment has slumped in Japan since tighter building regulations went into effect in late June. Builders have struggled to adjust to the new legal framework.
Private residential investment plunged 7.9 per cent in the July-September quarter, the largest drop since an 11.1 per cent tumble in April-June 1997.
Muto also said consumer sentiment in Japan was worsening with higher crude oil prices and the rising prices of daily necessities. Corporate sentiment was becoming cautious as well, he said.
Smaller firms are having difficulty transferring costs from high raw material prices and oil prices to their final goods, he said. Also, corporate sentiment is negatively affected by uncertainty over the global economy triggered by the U.S. subprime turmoil.''
Muto said the BOJ will gradually adjust Japan's interest rates the lowest among the Group of Seven industrialized nations on the basis of developments in the economy and prices, but he offered no fresh clues to the timing of any moves.
The BOJ last raised its key policy interest rate in February, from 0.25 percent to 0.5 percent. The central bank was widely expected to raise rates further, but held off to monitor the economy as problems from defaults on risky mortgages in the U.S. spread around the globe.
The policy board's next meeting is scheduled for January, 21& 22.
The nation's economic cycle is weakening now but the cycle itself remains intact,'' said Toshiro Muto, one of the Bank of Japan's two deputy governors.
However, looking ahead, the economy will keep expanding in the future,'' he told business leaders in Sapporo in northern Japan.
Muto's remarks echoed the bearish economic assessment made by BOJ Governor Toshihiko Fukui in December after the bank's policy body voted unanimously to leave its benchmark interest rate unchanged at 0.5 per cent.
Housing investment has slumped in Japan since tighter building regulations went into effect in late June. Builders have struggled to adjust to the new legal framework.
Private residential investment plunged 7.9 per cent in the July-September quarter, the largest drop since an 11.1 per cent tumble in April-June 1997.
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Muto also said consumer sentiment in Japan was worsening with higher crude oil prices and the rising prices of daily necessities. Corporate sentiment was becoming cautious as well, he said.
Smaller firms are having difficulty transferring costs from high raw material prices and oil prices to their final goods, he said. Also, corporate sentiment is negatively affected by uncertainty over the global economy triggered by the U.S. subprime turmoil.''
Muto said the BOJ will gradually adjust Japan's interest rates the lowest among the Group of Seven industrialized nations on the basis of developments in the economy and prices, but he offered no fresh clues to the timing of any moves.
The BOJ last raised its key policy interest rate in February, from 0.25 percent to 0.5 percent. The central bank was widely expected to raise rates further, but held off to monitor the economy as problems from defaults on risky mortgages in the U.S. spread around the globe.
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The policy board's next meeting is scheduled for January, 21& 22.
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