Introduction: Bank of Japan feels the gloom
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The Bank of Japan has become the latest top central bank to warn that the global economy is slowing.
At its latest policy meeting today, the BoJ downgraded its view of Japan’s economy – cautioning that exports and industrial output have been “affected by the slowdown in overseas economies.”
BoJ governor Haruhiko Kuroda warned that problems overseas are making it harder for Japan:
“It is true Japan’s exports and output are being affected by lean overseas growth. On the other hand, domestic demand continues to grow. We maintain our baseline view that the economy is expanding moderately.
“It is likely to take longer to achieve our price target.However, the output gap is improving … Most board members think it’s more appropriate to patiently maintain our current stimulus programme.”
So, although Japan’s domestic economy is growing, policymakers left its short-term interest rate target at minus 0.1 per cent.
The BoJ will also continue its policy of buying 10-year Japanese government bonds so that yields remain at around 0 per cent — to drive money into riskier assets and spur growth.
Bloomberg says Kuroda and colleagues are taking a more pessimistic view, given recent weak data.
The BOJ also downgraded its assessment of exports, factory output and overseas economies. The gloomier take on the economy was also largely expected after a raft of weak data over the past month.
The slowdown is making it even harder for the BoJ to achieve its target of raising inflation to 2% through its huge stimulus programme.
Kurora also warned there was a chance that the global economy deteriorate further — although he’s hoping for a pick-up soon.
He told reporters:
The chance of overseas economies worsening further is low. It’s a risk. However, the baseline scenario is for overseas economies to pick up in the latter half of this year,particularly areas that are currently witnessing signs of weakness such as China and Europe.”
Also coming up today
UK government contractor Interserve is facing a crunch vote on Friday which could push it into administration. It hopes to persuade shareholders to back a rescue deal in which lenders would own 95% of the firm.
But if shareholders reject its debt-for-equity-swap plan in the vote, lenders could push it into administration.
In the City, UK pub chain JD Wetherspoon and eateries chain the Restaurant Group are reporting results.
The agenda
- 10am GMT: Eurozone inflation for February
- 2pm GMT: University of Michigan survey of US consumer confidence
Updated