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2008年11月 1日 (土)


The Yomiuri Shimbun(Nov. 1, 2008)

Market, investors pushed BOJ to cut rate

日銀決定会合 市場が迫った利下げの決断(111日付・読売社説)

The Bank of Japan decided at a meeting of its Policy Board on Friday to cut its key interest rate for the first time in 7-1/2 years, with the governor, in a rare move, casting the deciding vote after a split vote among its members.


The central bank decided to encourage the uncollateralized overnight call rate to remain at around 0.3 percent, down from 0.5 percent. The rate cut was the first since March 2001, when the central bank introduced the quantitative easing policy, which increased the money supply.


In Tokyo, worries over the drastic appreciation of the yen and expectations over an interest rate cut combined to produce violent fluctuations of stock prices and exchange rates.


There was an especially strong fear that the yen's appreciation and the stock price plunge could accelerate unless the Bank of Japan followed the U.S. Federal Reserve Board in cutting interest rates.


Although interest rate cuts have only a limited direct effect as an economic stimulus measure, the central bank acted appropriately to prevent further instability in the market and financial system.



Explanation lacking

However, opinions of Policy Board members were split 4-4, and Gov. Masaaki Shirakawa, who is chairman of the board, made the final decision on the interest rate cut.


Of the four opponents, only one was against the cut itself, with the other three arguing for a 25-basis point cut.


After the central bank's announcement, the Nikkei Stock Average index's losses expanded as investors had expected the rate to be trimmed by the usual 25 basis points.


To address possible concerns harbored by the public that the Bank of Japan stinted on the long-awaited rate cut, the central bank should explain its intentions behind the move and what it hopes it will achieve.


As well as an attempt to calm market volatility, the central bank decided to implement its first credit-easing policy in a while because of damage caused to the real economy by the financial crisis.


The Bank of Japan says in its biannual Outlook for Economic Activity and Prices that "increased sluggishness in economic activity will likely remain until around the middle of fiscal 2009," a grim prognosis.



Adjustment steps needed

Also in the outlook report, the central bank revised downward its forecast for the nation's economic growth in fiscal 2008. The report says the economy this fiscal year will see almost zero growth, and that growth in fiscal 2009 will stay below 1 percent. The central bank said the economy will pick up growth potential in or after fiscal 2010.


With the central bank rate cut, interest rates will be further lowered, and the Bank of Japan's hands will be largely tied when it comes to monetary policy management. The central bank must come up with appropriate monetary adjustment steps that meet economic conditions, to stabilize both the financial system and the economy.


In this regard, we think it was appropriate that the bank, for the first time, set a 0.1 percent interest rate for financial institutions' current accounts at the central bank.


With this interest rate at the central bank, surplus funds at financial institutions will tend to accumulate at the Bank of Japan. That means the central bank will be able to provide funds to the market more smoothly.


This interest rate regime will continue until April. The central bank should take advantage of the system to make its monetary-easing policy more effective.


(From The Yomiuri Shimbun, Nov. 1, 2008)

20081110137  読売新聞)


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