Japan’s official discount rate, the world’s lowest at a mere 0.5 percent, may rise by the end of the year, Shinpei Nukaya, the Economic Planning Agency’s vice minister, implied August 5.
“When the recovery of the economy becomes firmer, the the low (official discount) interest rate that we have currently will not last for long,” Nukaya said during a monthly news conference to give the government’s view of the economy. Nukaya, the EPA’s most senior career bureaucrat, made the comment as he explained the views of EPA head Taro Aso, who has reportedly said a rate hike is possible this year. Nukaya held the news conference in place of Aso, who is in the United States for regular economic consultations between the EPA and the U.S. Council of Economic Advisers.
Aso reportedly spoke August 3 of the possible rate hike, according to news reports from Washington. Japan’s official discount rate, which the Bank of Japan charges for its loans to commercial banks, has been maintained at a historic low of 0.5 percent since September 1995. No country’s central bank has had such a low official discount rate. The ultra-low rate was intended to ease the economic slowdown following the bubble years until the early 1990s. Because the economy is now slowly recovering, financial markets and investors are watching for when the government will make the inevitable hike.