Japan cuts interest rates

n a bid to fight off recession Japan has taken drastic action by cutting interest rates for the first time in over seven years.

The Bank of Japan (BOJ) cut its benchmark interest rate to 0.3 percent to help stave off a prolonged recession.

The Governor of the BOJ, Masaaki Shirakawa, was the deciding vote in cutting interest rates from 0.5 percent to 0.3 percent today, even though three of the policy makers wanted a cut down to 0.25 percent.

The Bank of Japan came under pressure today to lower borrowing costs as the Nikkei 225 fell to its lowest average since 1982 earlier this week. Although their argument that borrowing costs were already at an all-time low were not enough as the economy was still struggling to fight off the global economic downturn.

Many analysts have called this a half hearted measure as the overall opinion was that rates were predicted to fall to 0.25 percent as the $51 billion package announced by the government yesterday was not enough.

The BOJ has now seemingly sent the wrong signals to the economy and the decision has also filtered down to foreign investors who would have been left with the opinion that the central bank is not able to manage its interest rates flexibly.

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