Japan's economic recovery confirmed by rate increase

20-07-2006

Japan's economic recovery confirmed by rate increase
Japan's re-emergence from its economic slump was today all but established after its central bank raised key interest rates up 0.25 percentage points from zero.

Although the decision was widely-predicted, bank chiefs took over two days to decide upon the slight rise, as economic confidence returns to Japan with business growth going hand in hand with plummeting unemployment.

The bank's members are believed to have been under pressure from the government not to raise interest rates too rapidly, and Toshihiko Fukui, the Bank of Japan's governor, confirmed that there would be a series of gentle increases, ruling out consecutive hikes witnessed from both the US federal reserve and the European Central Bank.

"We will adjust interest rates gradually while carefully checking the economy and prices," he said.

"Today's decision will contribute to ensuring price stability and achieving sustainable growth in the medium and to long term," a statement from the bank added, as economic emphasis shifts from tackling inflation to sustaining recent growth.

Although interest rates in Japan may appear insubstantial compared to those experienced in the west, analysts believe that today's decision was important from a solely economic perspective as otherwise market fluctuations would have been likely in the near future.

The Japanese government recently announced that unemployment had hit a decade-low of four per cent, while today's confirmation of confidence returning to one of the world's economic powerhouses represents something of a legacy for the country's prime minister, Junichiro Koizumi, who will leave the role in the autumn after five successful years in office.

Related categories: Management / Business, Banking / Finance, International / Overseas.


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