The Bank of Japan held interest rates steady at 0.1% today for the eleventh consecutive time, meeting markets' expectations. While at the same time the bank upgraded their assessment to the economy, as the economy is said to be "recovering" from the worst post-war crisis. The BoJ referred this progress to the provided monetary easing and stimulus packages from the bank and the government that managed to support the economy.
In the accompanying statement, policy makers noted that economic conditions are improving in Japan, yet they see that it was not solidly supported by rising domestic spending and consumption which remains very frail. Improvement are somewhat being witnessed on that front as spending is generally rising where imports increased and industrial production improvement which was mainly fueled by low inventories which helped factories resume production. The stability in the global economy also has its effect on the Japanese economy especially as exports demand start to stabilize and improve.
Spending on durable goods is improving, yet it still lingers near very low levels. The improvement in spending was supported by the measures taken to stimulate the economy which is easing tight credit conditions and encourages lending. The starting signs of stability are seen despite falling disposable income and high jobless rate.
Regarding inflation, the bank sees that annual consumer prices stripped of the volatility of food and energy prices are still very low in comparison to last year's levels; low inflation is parallel to the subdued economic conditions and low domestic demand. The bank expects medium to long term price stability and the drop in consumer prices will start to ease and will stabilize affected by rising commodity prices.
The pace of recovery will likely remain moderate till the first half of 2010; yet noted that the improvement in exports will support households spending and will help gradually increase growth. The bank pledged to continue to support the economy and provided the needed measures to stabilize the financial sector that will in role support the economy and assure price stability.
The economy expanded by 4.8% in the third quarter, which was the fastest pace in more than two years; while consumer prices dropped by 2.3% in September which is the seventh consecutive drop influenced by discounts offered by retailers to encourage spending.
The Prime Minister stated that deflationary risks are increasing which opposes the BoJ's expectations, as they see price stability over the medium term; this conflicting assessment for the state of the economy from the BoJ and the government is fueling expectations that the bank might alter its policy and increase its purchases of government debt especially before concluding its asset purchases program with the end of this year, as access to liquidity is starting to stabilize in the economy.
The problem is that rates are already near zero and does not provide much room for maneuvering and for that the bank is obligated to use unorthodox policies to fight deflation risks. The continued pressure from the government and fears of deflation might in the end pressure the bank into adopting more policies to assure price stability shall the need be clearly evident.
In the accompanying statement, policy makers noted that economic conditions are improving in Japan, yet they see that it was not solidly supported by rising domestic spending and consumption which remains very frail. Improvement are somewhat being witnessed on that front as spending is generally rising where imports increased and industrial production improvement which was mainly fueled by low inventories which helped factories resume production. The stability in the global economy also has its effect on the Japanese economy especially as exports demand start to stabilize and improve.
Spending on durable goods is improving, yet it still lingers near very low levels. The improvement in spending was supported by the measures taken to stimulate the economy which is easing tight credit conditions and encourages lending. The starting signs of stability are seen despite falling disposable income and high jobless rate.
Regarding inflation, the bank sees that annual consumer prices stripped of the volatility of food and energy prices are still very low in comparison to last year's levels; low inflation is parallel to the subdued economic conditions and low domestic demand. The bank expects medium to long term price stability and the drop in consumer prices will start to ease and will stabilize affected by rising commodity prices.
The pace of recovery will likely remain moderate till the first half of 2010; yet noted that the improvement in exports will support households spending and will help gradually increase growth. The bank pledged to continue to support the economy and provided the needed measures to stabilize the financial sector that will in role support the economy and assure price stability.
The economy expanded by 4.8% in the third quarter, which was the fastest pace in more than two years; while consumer prices dropped by 2.3% in September which is the seventh consecutive drop influenced by discounts offered by retailers to encourage spending.
The Prime Minister stated that deflationary risks are increasing which opposes the BoJ's expectations, as they see price stability over the medium term; this conflicting assessment for the state of the economy from the BoJ and the government is fueling expectations that the bank might alter its policy and increase its purchases of government debt especially before concluding its asset purchases program with the end of this year, as access to liquidity is starting to stabilize in the economy.
The problem is that rates are already near zero and does not provide much room for maneuvering and for that the bank is obligated to use unorthodox policies to fight deflation risks. The continued pressure from the government and fears of deflation might in the end pressure the bank into adopting more policies to assure price stability shall the need be clearly evident.
