Japan decides to keep interest rates low to stimulate growth

Japan keeps interest rates low

Japan keeps interest rates low

The Japanese government has decided to continue with low interest regime and key interest rates have been set between 0 and 1 percent to stimulate growth.

The Japanese Central Bank issued a warning stating that the economy ‘seems to be pausing’. The Japanese economy has seen falling prices, lower exports and a strong currency.

In an attempt to boost the economy and create more jobs, the government announced a stimulus package of $61 billion (£39 billion). The Bank of Japan declared that additional steps will be taken to help the economy recover.

The Central Bank said that although the economy was showing signs of “moderate recovery”, the bank would “continue to carefully examine the outlook for economic activity and prices, and take policy action in an appropriate manner”.

The Bank expressed its worry over the declining consumer demand and business sentiment and the resultant fall in manufacturing.

Although the Japanese economy grew at an annual rate of 4% between July and September, many economists are not convinced and term the growth unsustainable. They expect the fourth quarter growth to be lower.

Japanese exports have suffered heavily in recent times as demand for its goods slumped due to the economic crisis. Adding to the woes, the Yen became stronger making export more expensive and uncompetitive.

Japan has witnessed deflation – a condition where prices of goods and services fall, for 20 months in a row. This has seriously hampered consumer confidence and stifled fresh private investments.

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