Bank of Japan keeps interest rates on hold

Following a two day meeting, the Bank of Japan has held its main interest rate at 0.5%, a decision which had been widely expected by analysts. It indicates that the state of the economy is still strong at that the country does not have the same inflationary fears and threats that have coerced the Federal Reserve and the Bank of England into action.

Governor Masaaki Shirakawa said that the central bank will keep a close eye on the risk that higher oil and food prices may have on economic growth as well as inflationary threats.

This represents the eighth straight meeting in which the bank’s policy board voted to retain the rates at 0.5 percent.

Analysts had all but ruled out the possibility of raising rates because of the difficult monetary conditions.

In the time of rising prices, Japanese companies are passing on higher costs to their consumer and with the increase in commodity prices and raw materials, this is set to continue at this rate which will only slow growth further.

Producer-prices rose 4.7 percent in May and due to these increases, profits have dropped at the quickest pace in six years over the last quarter.

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