Bank of Japan warns of struggling economy

Economic growth in Japan seems to be stalling as the Bank of Japan (BOJ) warned that in eight of the nine regions, the economy has been affected by a sharp rise in raw materials and energy prices which have halted the country in expansion as manufacturing was hardest hit.

The BOJ Governor, Masaaki Shirakawa, said that global financial markets remain unstable due to the subprime crisis, as well as the US economy affecting Japan, as corporate profits are falling as well as a slowdown in capital investments.

The Governor did indicate that a steady change in monetary policy would be on the agenda although the Japanese economy is expected to grow at a slower pace for the time.

The central bank has made a u-turn on gradually raising interest rates, although it is clear that changes are needed as the northern region of Tohoku is the only one not to have its economic assessment cut.

Domestically, consumer spending has generally been described as sluggish and it is apparent that the Yen’s 4 percent gain against the dollar has affected exporters including Sharp Corp. and Matsushita Electric Industrial Co as, during the month the yen has fallen to 107.68 per dollar from 106.80.

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