The Bank of Japan Raises Rates

For the first time in six years, the BOJ has increased interest rates. The overnight rate has been lifted from near-zero to 0.25%.

The bank’s decision means the end of deflation is near, said Prime Minister Junichiro Koizumi, speaking in Jordan. It’s too early to discuss the timing of another rate increase, Tanigaki said today, adding that the government will closely watch the effect of the move. Today’s decision was “appropriate,” Chief Cabinet Secretary Shinzo Abe said.
The government opposed the bank’s last rate increase in August 2000. Seven months later, the bank had to cut rates back to almost zero as an Internet-led global economic boom faltered.
Fukui said in an interview on May 31 that the bank must “carefully gauge the impact the first rate increase will have on the burden for companies” and the overall economy before increasing rates again.
The Bank of Japan on March 9 ended a five-year deflation- fighting policy of pumping up to 35 trillion yen ($303 billion) into the banking system. Consumer prices have now racked up seven months of gains, unemployment is at an eight-year low and lending by banks grew at the fastest pace in a decade in June.

Posted by on July 14th, 2006 at 7:18 am


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