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22.12.2008 Business & Finance

Japan Forecasts No Growth In 2009

By Daily Guide
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Taro Aso - Prime Minister of Japan Japan's government has predicted that the country's economy will have zero growth in the year ending March 2010. It is the first projection from the government of no growth in the gross domestic product in seven years.

It follows a revised projection for the current fiscal year that the economy will shrink by 0.8 percent, instead of the 1.3 percent growth projected in July.

The Bank of Japan (BOJ) has cut its key interest rate to just 0.1 percent, down from 0.3 percent, taking it lower than US rates.

The BOJ also announced that it would increase its purchase of Japanese government bonds to 1.4 trillion Yen ($15.7bn) a month, up from 1.2 trillion Yen.

"A small rate cut alone would not help the economy much," said Norio Miyagawa, economist at Shinko Research Institute.

"And with Japan's interest rates at nearly zero, the central bank will likely continue to adopt other measures to provide ample liquidity to help the economy."

A survey earlier this week indicated that business confidence in Japan was at its lowest in 34 years.

Last week the government increased its economic stimulus plan by 23 trillion Yen ($255bn; £171bn).

The world's second-largest economy - and Asia's largest - shrank by an annualized rate of 1.8 percent in the third quarter.

Japanese exporters have been suffering amid the global financial downturn and the Yen's surge to a 13-year high.

"The economy is worsening very quickly and the BOJ and the government will need to keep working closely. But there is still no guarantee that announced steps will be able to stop the economy from collapsing," said Hideo Kumano at Dai-ichi Life Research Institute.

Source: BBC

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