Japan cuts interest rate to near-zero
20-12-2008
The Bank of Japan has slashed interest rates to near zero, in a bid to stave off a severe recession as the government said the economy would not grow until at least 2010. Japan joined a wave of rate cuts by central banks around the world amid forecasts that the overall global economy will next year suffer its first contraction in decades. The BoJ also tried to shore up ailing credit markets by announcing it would start directly buying commercial paper, the short-term debt that companies issue to run their daily operations. In a 7-1 vote, the Bank's policy board said that it was cutting the rate of borrowing from 0.3 percent to 0.1 percent. However, the Nikkei index in Tokyo still closed lower, despite a brief surge following the rate cut. The yen eased back modestly after this week soaring to a 13-year high against the US dollar. A Bank of Japan statement explaining the move, offered a bleak picture of the economy. "Financial conditions have deteriorated sharply on the whole," it said. "Under these circumstances, economic conditions have been deteriorating and are likely to increase in severity in the immediate future," it said.
