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Bank of Japan leaves basic rate unchanged at 0.25%

Thursday, January 18th 2007 - 20:00 UTC
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The Bank of Japan left Thursday its benchmark interest rate unchanged at 0.25%, following two days of deliberations and apparently appeasing government officials who say consumer spending and inflation are still too weak.

Policymakers voted 6 to 3 to leave the rate at 0.25% said the bank in an official release in Tokyo. The last time the Bank of Japan raised rates was July 2006 after almost six years of zero rates while the world's second-largest economy struggled to emerge from seven years of deflation. Bank of Japan Governor Toshihiko Fukui plans to gradually raise rates to prevent a repeat of a stock and property bubble in the 1980s that foreshadowed a decade of stagnation. Japan's economy expanded at the slowest pace in almost two years in the third quarter of 2006 as consumer spending dropped 0.9%, the biggest decline in almost a decade, masking growth in corporate investment and exports. Consumer spending, which accounts more than half of the economy, probably "had a big jump in the fourth quarter," Hideo Hayakawa, the central bank's chief economist, said at an economic forum last January 10. In the lead up to Thursday's decision Government officials have been voicing concern that an increase this month may be too early. Economic and Fiscal Policy Minister Hiroko Ota said this week that Japan's consumption remains weak and that there is no guarantee the economy wouldn't slip back into deflation following a rate increase. Prime Minister Shinzo Abe's government, focusing on policies to spur growth and stop the expansion of the world's largest public debt, wants to avoid an economic slowdown ahead of elections in April and July. Abe on Wednesday said that the government and the central bank shared the goal of beating deflation and achieving strong economic growth and that he believed the central bank would "make an appropriate judgment."

Categories: Economy, International.

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