The Bank of Japan cut its growth forecasts and said it will consider buying corporate bonds to prevent a shortage of credit from deepening the recession.
The central bank may buy corporate bonds with a maturity of up to one year, it said in a statement released today in Tokyo. Governor Masaaki Shirakawa and his board forecast the economy will shrink until the year starting April 2010 and signaled a return to deflation in a quarterly review of the outlook.
Exports plunged a record 35 percent in December, a report showed today, evidence the global recession is likely to keep hurting the world’s second-largest economy and discourage investment in Japanese companies. Central banks around the world are broadening the range of assets they buy to thaw credit markets that remain frozen even as interest rates approach zero.
“They’re trying to supplement corporate finance” as the economy deteriorates, said Tomoko Fujii, head of Japan economics and strategy at Bank of America Corp. in Tokyo. “That’s all they can do,” she said, adding that the government should spend more to spur growth.
The policy board also decided unanimously to keep the key overnight lending rate on hold after cutting it to 0.1 percent last month from 0.3 percent.
The Nikkei 225 Stock Average rose 1.9 percent to 8,051.74 at the close, paring its drop this year to 9.1 percent. The yen traded at 89.07 per dollar from 89.04 before the announcement.
Forecasts Cut
The world’s second-largest economy will shrink 1.8 percent in the year ending March 31 and 2 percent next year before recovering to expand 1.5 percent in the period through March 2011, according to median estimates of the eight board members.
Consumer prices excluding fresh food will drop 1.1 percent next fiscal year and 0.4 percent in the year to March 2011, they said. The economy is “likely to continue deteriorating for the time being,” the bank said in today’s statement.
Shirakawa instructed his staff to “swiftly map out a concrete plan” for purchasing corporate bonds from financial institutions, the statement said. The bank also provided details of plans unveiled last month to buy commercial paper.
“The mechanism of the corporate bond market has deteriorated sharply,” Shirakawa told reporters after the meeting. Given that the overnight lending rate is already at 0.1 percent, the central bank will focus on trying to bring down longer-term borrowing costs for companies, the governor said. At the same time, he added, the policy board isn’t considering additional steps to those announced today.
‘Right Direction’
The Bank of Japan cut its growth forecasts and said it will consider buying corporate bonds to prevent a shortage of credit from deepening the recession.
The central bank may buy corporate bonds with a maturity of up to one year, it said in a statement released today in Tokyo. Governor Masaaki Shirakawa and his board forecast the economy will shrink until the year starting April 2010 and signaled a return to deflation in a quarterly review of the outlook.
Exports plunged a record 35 percent in December, a report showed today, evidence the global recession is likely to keep hurting the world’s second-largest economy and discourage investment in Japanese companies. Central banks around the world are broadening the range of assets they buy to thaw credit markets that remain frozen even as interest rates approach zero.
“They’re trying to supplement corporate finance” as the economy deteriorates, said Tomoko Fujii, head of Japan economics and strategy at Bank of America Corp. in Tokyo. “That’s all they can do,” she said, adding that the government should spend more to spur growth.
The policy board also decided unanimously to keep the key overnight lending rate on hold after cutting it to 0.1 percent last month from 0.3 percent.
The Nikkei 225 Stock Average rose 1.9 percent to 8,051.74 at the close, paring its drop this year to 9.1 percent. The yen traded at 89.07 per dollar from 89.04 before the announcement.
Forecasts Cut
The world’s second-largest economy will shrink 1.8 percent in the year ending March 31 and 2 percent next year before recovering to expand 1.5 percent in the period through March 2011, according to median estimates of the eight board members.
Consumer prices excluding fresh food will drop 1.1 percent next fiscal year and 0.4 percent in the year to March 2011, they said. The economy is “likely to continue deteriorating for the time being,” the bank said in today’s statement.
Shirakawa instructed his staff to “swiftly map out a concrete plan” for purchasing corporate bonds from financial institutions, the statement said. The bank also provided details of plans unveiled last month to buy commercial paper.
“The mechanism of the corporate bond market has deteriorated sharply,” Shirakawa told reporters after the meeting. Given that the overnight lending rate is already at 0.1 percent, the central bank will focus on trying to bring down longer-term borrowing costs for companies, the governor said. At the same time, he added, the policy board isn’t considering additional steps to those announced today.
‘Right Direction’
