Japan’s Recession Easing, Holds Rate at 0.1%

Tuesday, June 16, 2009

The Bank of Japan said the nation’s worst recession since World War II is easing after exports improved and industrial output rose the most in 56 years.

“Japan’s economic conditions, after deteriorating significantly, have begun to stop worsening,” the bank said in a statement in Tokyo today, after leaving the overnight lending rate at 0.1 percent. “In the coming months, Japan’s economy is likely to show clearer evidence of leveling out over time.”

Governor Masaaki Shirakawa may signal later today that it’s too soon to consider unwinding the bank’s policies of buying corporate debt and providing lenders with ample funds because the economy remains fragile. The yen rose, worsening the outlook for exporters, and stocks slumped the most in more than two months on concern a global recovery may be delayed.

“The BOJ is still cautious about the prospects for the economy and is still far away from an exit,” said Masaaki Kanno, chief economist in Tokyo at JPMorgan Chase & Co., who used to work at the central bank.

Japan’s currency gained 1.6 percent to 96.27 per dollar at 3:41 p.m. in Tokyo from 96.84 late yesterday. The Nikkei 225 Stock Average slumped 2.9 percent, the biggest drop since March 30, as a report on New York manufacturing damped optimism for a U.S. recovery.

The central bank said there are “continued high downside risks” facing Japan, citing developments in domestic and global financial conditions and the world economy.


(Bloomberg)