Bank of Japan keeps rates at 0.5%

15 July 2008

The Bank of Japan has held interest rates at 0.5 per cent this month.

According to the central bank, the Japanese economy will grow by 1.2 per cent over the next financial year - a reduction in the previous prediction of 1.5 per cent.

Rising food and fuel costs were cited as a reason for this downwards revision - and also caused the Bank to raise its inflation forecast from 1.1 to 1.8 per cent.

In a statement, the Bank said that "downside risks" to the economy "demand attention", and also predicted that GDP increases would continue to slow.

"Economic growth is slowing further, reflecting weaker growth in business fixed investment and private consumption against the backdrop of high energy and materials prices,'' it added.

Commenting to news agency Bloomberg, chief economist at JPMorgan's Tokyo office Masaaki Kanno said: "[The Bank is] more concerned about the downside risks to growth…unless wage rates pick up, the bank isn't so concerned about inflation."

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