Tuesday June 16, 06:03 AM
Bank of Japan holds rate, upgrades economic view
By Shingo Ito
TOKYO (AFP) - Japan's central bank has left its key interest rate unchanged at 0.1 percent, while upgrading its assessment of the world's number two economy for a second month in a row.
"Japan's economic conditions, after deteriorating significantly, have begun to stop worsening," the Bank of Japan said in a statement. "Japan's economy is likely to show clearer evidence of levelling out over time."
Last month, the central bank upgraded its assessment for the first time in almost three years, saying: "Economic conditions have been deteriorating, but exports and production are beginning to level out."
Recent economic data has shown a mixed picture for the Japanese economy, which has been hit hard by the global downturn but with many analysts now predicting it will stabilise in the current quarter.
The Bank of Japan, which made the rate decision by a unanimous vote, said it would continue "paying attention for the time being to the downside risks to economic activity and prices."
On Monday, Japan's industry ministry also improved its assessment of the business climate for the first time in more than three years, saying: The economy is showing a few signs of recovery in some (geographic) parts."
The government said last Thursday that Japan's economy shrank less than initially thought in the first quarter of 2009, but still logged its sharpest contraction on record, shrinking an annualised 14.2 percent.
The economy, which has been in recession since the second quarter of 2008, shrank by a revised 3.8 percent in the three months to March, compared with its earlier estimate of 4.0 percent.
"Japan is most likely to return to positive growth for the April-June quarter as a slump in external demand is easing," said Toru Shimano, an analyst at Okasan Securities.
"But this does not mean Japan's full fledged recovery is in sight," Shimano (Stuttgart: 865682 - news) said. "It is still very much unlikely for the Japanese economy to return to pre-crisis levels by the end of this year."
Factory output in April rose a revised 5.9 percent, the fastest monthly jump in more than half a century, while Japan reported the third straight monthly trade surplus in April, following a record deficit in January.
But wholesale prices dived 5.4 percent in May from a year earlier, the biggest drop in more than 22 years, signalling deflation may again haunt Japan's economy, as it did in the 1990s.
And unemployment rose to 5.0 percent in April, the highest since November 2003, after the country's auto and high-tech giants announced massive job cuts in recent months as they sank deep into the red.
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