Japan cuts interest rates again

Japan has cut interest rates to just 0.1 percent and has brought in a number of measures in order to safeguard the economy.

The move has revealed the severity of the downturn and its affects on the Japanese economy, and so the central bank has now moved towards quantitative easing following in the footsteps of the Federal Reserve and they previously adopted this policy in the last economic downturn.

As part of quantitative easing thus far, 20 trillion yen has been used to buy shares in order to prop up the banking sector.

Japan’s economy has declined in the current quarter at an alarming rate and the auto industry is falling into a great depression which makes short-term recovery very unlikely.

There is also increased concern that the rise of the yen will continue to affect Japanese exports and corporate earnings.

Both the car and electronics makers have had to drastically reduce profit forecasts as consumers are waiting before they commit to big purchases due to the threat of deflation.

Analysts have revealed that the spending is an all out measure and has followed in the aggressive move made by the Federal Reserve.

The central bank has also focused on government bond purchases from banks in order to increase liquidity and help companies come back from the crisis.

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