Post Fed cut, global market turmoil, Japan may lower rates
The US interest rate cut, jitters about a global market turmoil and prospects of slower economic growth are spurring speculation that Japan's central bank may cut rates in coming months.
By Agencies |
TOKYO: The surprise US interest rate cut, jitters about a global market turmoil and prospects of slower economic growth are spurring speculation here that Japan's central bank may cut rates in coming months not raise them as previously expected.
Bank of Japan Governor Toshiko Fukui set off the talk on Tuesday after suggesting in cryptic comments that Japan was ``entering a delicate phase'' that called for ``careful judgments.''
The central bank left its key interest rate at 0.5 per cent Tuesday hours before the US Federal Reserve announced a three-quarters percentage point cut to keep the US economy from sliding into a recession.
The move lifted Asian markets, which had plunged Monday and Tuesday on fears about a US slowdown, which would squelch demand for the region's exports. But analysts warn that the credit crunch gripping the US economy could still drag on global growth.
Some Japanese government ministers have talked about the need to cooperate with other nations to stave off a domino-like plunge in regional stock markets, without offering any specifics.
``We must take the approach of working together with other nations on this,'' Economy Minister Hiroko Ota said earlier this week.
Yoshimi Watanabe, a vocal minister in charge of economic reforms, said on a nationally televised news show late Tuesday that he believes the Bank of Japan should take action in concert with the Federal Reserve by pumping more cash into the financial markets or even slashing interest rates.
Such speculation is natural for Japan, where the idea of showing policy unity with the US, its most important ally, and other Western nations, is so deeply entrenched, said Tsuyoshi Segawa, strategist at Shinko Securities Co in Tokyo.
``That's why the view that Japan may cut interest rates is naturally going to emerge,'' he said, adding that he personally thinks a rate cut is unlikely. ``It's rather clear to everyone that such a move will have little effect.''
Still, the Asahi newspaper, one of Japan's biggest, said in a headline Wednesday: ``BOJ rate cut perhaps becomes more real.''
For much of last year, analysts were predicting the BOJ would raise rates.
But beyond the recent market turmoil, economic numbers coming out of Japan suggest growth may be slowing.
The Japanese economy grew at a weaker momentum than originally thought in the third quarter expanding at a 1.5 per cent rate instead of an earlier reported 2.6 per cent due to a downward revision in corporate capital investment. The jobless rate was at 3.8 per cent in November, and sentiment at major companies has fallen to a two-year low.
Some analysts are starting to grumble the central bank waited too long and should have raised interest rates earlier, perhaps over the past year when the economy was doing relatively well.
Finance Minister Fukushiro Nukaga welcomed the Fed's move but said little on what Japan had in mind for measures.
``I hope it will lead to stability in U.S. financial markets as well as the world's economy,'' Nukaga told reporters. ``I hope that it will also have a positive impact on Japanese markets.''
Bank of Japan Governor Toshiko Fukui set off the talk on Tuesday after suggesting in cryptic comments that Japan was ``entering a delicate phase'' that called for ``careful judgments.''
The central bank left its key interest rate at 0.5 per cent Tuesday hours before the US Federal Reserve announced a three-quarters percentage point cut to keep the US economy from sliding into a recession.
The move lifted Asian markets, which had plunged Monday and Tuesday on fears about a US slowdown, which would squelch demand for the region's exports. But analysts warn that the credit crunch gripping the US economy could still drag on global growth.
Some Japanese government ministers have talked about the need to cooperate with other nations to stave off a domino-like plunge in regional stock markets, without offering any specifics.
``We must take the approach of working together with other nations on this,'' Economy Minister Hiroko Ota said earlier this week.
ADVERTISEMENT
Yoshimi Watanabe, a vocal minister in charge of economic reforms, said on a nationally televised news show late Tuesday that he believes the Bank of Japan should take action in concert with the Federal Reserve by pumping more cash into the financial markets or even slashing interest rates.
Such speculation is natural for Japan, where the idea of showing policy unity with the US, its most important ally, and other Western nations, is so deeply entrenched, said Tsuyoshi Segawa, strategist at Shinko Securities Co in Tokyo.
``That's why the view that Japan may cut interest rates is naturally going to emerge,'' he said, adding that he personally thinks a rate cut is unlikely. ``It's rather clear to everyone that such a move will have little effect.''
Still, the Asahi newspaper, one of Japan's biggest, said in a headline Wednesday: ``BOJ rate cut perhaps becomes more real.''
ADVERTISEMENT
For much of last year, analysts were predicting the BOJ would raise rates.
But beyond the recent market turmoil, economic numbers coming out of Japan suggest growth may be slowing.
ADVERTISEMENT
The Japanese economy grew at a weaker momentum than originally thought in the third quarter expanding at a 1.5 per cent rate instead of an earlier reported 2.6 per cent due to a downward revision in corporate capital investment. The jobless rate was at 3.8 per cent in November, and sentiment at major companies has fallen to a two-year low.
Some analysts are starting to grumble the central bank waited too long and should have raised interest rates earlier, perhaps over the past year when the economy was doing relatively well.
Finance Minister Fukushiro Nukaga welcomed the Fed's move but said little on what Japan had in mind for measures.
``I hope it will lead to stability in U.S. financial markets as well as the world's economy,'' Nukaga told reporters. ``I hope that it will also have a positive impact on Japanese markets.''
Download
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
