Bank of Japan Leaves Rates Untouched

The Bank of Japan has today announced its decision to maintain interest rates at 0.5% for the seventh consecutive month, in a move that was backed by a majority of eight to one amidst current market fears.

The move reflects the ongoing turmoil in stock markets and the global financial sector as a result of the fallout from the sub-prime lending sector, which has had a profound impact on the health of economies around the globe.

Despite the Federal Reserve’s move to cut interest rates by two increments to 4.75% yesterday, the Bank of Japan have motioned to maintain the rates as they await further clarification of the economic impact of the changing face of the US economy.

Many analysts within Japan had expressed concern that exports to the US market could be hit by the sub-prime crisis, which may still be the case depending on the direction of consumer attitudes and confidence over the coming weeks.

Furthermore markets are still waiting to see whether the sub-prime fallout will have any impact on export markets in Europe and through Asia, which have been growing in strength over the last few months and are beginning to account for more of a proportion of Japanese national output.

The last time interest rates were altered in Japan was back in February, in which rates were raised by a quarter of a percentage point to account for rising inflation, as an attempt to stabilise growth and reduce upwards price pressures.

The Bank has chosen to exercise caution since the sub-prime lending sector began to have an impact on wider economic performance. With markets now potentially beginning to regain some stability, analysts are eagerly anticipating the next round of US figures in particular, which should help cast some light on the future of the world economy over the short term.

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