Japan cut key interest rate to 0.1 pct
19/12/2008 16:40
The Bank of Japan (BOJ) cut its key interest rate to 0.1 percent from 0.3
percent today with an aim of boosting the faltered economy amid worsening global
economic crisis.
The BOJ's eight-member Policy Board voted by 7-to-1 to lower
the target rate for unsecured overnight call money for the second time this
year. It also decided to lower the basic loan rate from 0.5 to 0.3
percent.
The panel lowered the key interest rate to 0.3 percent from 0.5
percent on Oct. 31 in its first rate reduction since March 2001.
BOJ
explained the decision in an statement on its website, describing the economic
conditions have been "deteriorating and are likely to increase in severity for
the immediate future".
"Given the slowdown in overseas economies and the
turmoil in global financial markets, it will likely take some time for the
necessary conditions for Japan's economic recovery to be satisfied, " according
to the statement.
The central bank also decided to temporarily purchase
outright commercial paper, or short-term debt issued by companies, in an effort
to facilitate corporate financing at a time when firms are facing difficulty
raising operating capital through financial markets.
The BOJ also said it
will increase its outright purchases of Japanese government bonds to supply
long-term funds and boost liquidity in capital and corporate debt markets
The
Japanese central bank has been under increasing pressure to cut the key interest
rate, especially after the US Federal Reserve decided Tuesday to, in effect, cut
its main interest rate to zero percent.
The dollar fell to a 13-year low
against the yen this week after the US rate cut, as many investors dumped the
dollar for yen and other currencies.
An appreciating yen hurts Japanese
exports as it capped companies profits when converted into yen. Japan's economy
relies heavily on export.
"The Bank will continue to do its utmost as a
central bank to facilitate the return of Japan's economy to a sustainable growth
path with price stability," BOJ said.
Japan's benchmark Nikkei stock index
jumped after the rate cut but the rise was short-lived as the rate cut was
largely in line with market expectation. The yen also only modestly edged up
against the dollar.
The BOJ Governor Masaaki Shirakawa will meet the press at
03:30 pm local time to brief the outcome of the two-day policy meeting ended
today.
Xinhua
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