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The BOJ ensured that interest rates will remain at its low level after ending its exceptional rescue program

Thu, Nov 5 2009, 02:17 GMT
by ecPulse.com analysis team

ecPulse.com

The BOJ released the minutes of the October 13 and 14 meeting when the bank decided to keep interest rates at its low record of 0.10%. The bank said that the economy started to pick up and public investment is increasing along with improving exports and production.

The bank said that the decline in business fixed investment that came along with weak corporate profits is moderating, while private consumption remains generally weak. The BOJ board members said that ending the emergency program doesn’t mean that the BOJ will raise interest rates from its low record.

Mr. Masaaki Shirakawa and his colleagues decided on October 30 to end the corporate debts buying program and the bank ensured that interest rates will remain at its low record to stimulate economic growth as the bank expects deflation risks to wane by April 2011.

The BOJ decided last week to extend a financial program that provide limitless loans to companies and banks with low rated debts as collateral and said this program will last till March 31, 2010. The BOJ board members said that uncertainties remain founded despite economic conditions improved.

Moving to the Australian economy, a report today showed that Australia's trade balance deficit widened in September less than expected and exports continued to rise along with recovering world demand that helped the Australian exports sector to recover.

Australia's trade balance deficit widened in September recording A$1849 million compared with a previous deficit of A$1651 million that was revised to A$1651 million and it came better than the analyst's forecasts of A$2150 million.

However, exports gained 5% in September recording A$20.2 billion as coal shipments surged 9%, while imports inclined by 5% to record A$22.1 billion as consumer goods imports rose 2%, while fuel imports rose 71%.

Rising exports is adding to signs of recovery in the Australian economy that is performing stronger than forecasts. Demand from China for natural resources supported the Australian exports sector to participate effectively in the recovery process, having in mind that governor Stevens said that economic recovery in China is supporting the local economy.

The Reserve Bank of Australia raised interest rates twice in four weeks after the nation's benchmark was cut by 4.25% to reach 3.00% the lowest in 49 years, then came the first rate hike this year by 25 basis points in October followed by a similar decision this week making interest rates reach 3.50%.

Raising interest rates helped the Australian dollar to appreciate against its American counterpart that is threatening Australian exporters making Australia's products less competitive, noteworthy that the AUD recorded the its highest against the U.S dollar this year at 0.9326 on October 21.

On the other hand, recovering commodity prices is adding to Australia's shipments value which that is in the favor of Australian companies that is anticipating higher profits by the end of this year after losses incurred in the first three months.

The Australian economy expanded 1.0% in the first half of this year avoiding technical recession and performing better than other major economies that still looking for its way out of the financial crisis the worst since the great depression.

Yet, Treasurer Wayne Swan expects the economy to grow 1.5% in the in the 12 months ended June 30, 2010 compared with earlier forecasts of a contraction by 0.5%, while economic growth is expected to accelerate to 2.75% in the next fiscal year.

Published on  Thu, Nov 5 2009, 05:24 GMT