The Bank of Japan on Thursday lowered its economic growth forecast for the current and 2010 fiscal years and revised its inflation outlook downward amid the global recession.
With little room left for a further rate cut, however, the BOJ decided to maintain its key interest rate at 0.1 percent. It also refrained from expanding a program of purchasing corporate and government debt.
“Economic conditions are likely to continue deteriorating in the coming months but gradually level out thereafter, and the growth rate is expected to recover at a moderate pace from the latter half of fiscal 2009,” the BOJ said in a statement released after its Policy Board meeting.
The BOJ “will continue to exert its utmost efforts . . . to facilitate the return of Japan’s economy to a sustainable growth path with price stability,” while continuing to pay attention to the downside risks to economic activity and prices.
The BOJ board cut its January forecast for real gross domestic product for the 2009 fiscal year from minus 2 percent to minus 3.1 percent. The central bank also lowered its forecast for growth in fiscal 2010 from 1.5 percent to 1.2 percent.
As for the consumer price index, the BOJ lowered its earlier forecast for the current fiscal year to minus 1.5 percent, down from the minus 1.1 percent it estimated in January. For fiscal 2010, the index is predicted to fall to minus 1 percent, rather than minus 0.4 percent, the BOJ said.
Some economists welcomed the BOJ’s latest forecasts.
“Since the January forecast was a little too optimistic, this revision brought the overall figures to appropriate levels,” said Takahide Kiuchi, chief economist at Nomura Securities Co.
Although the economy could improve in the short term as early as the April-June quarter, Kiuchi predicted that a sustainable economic recovery is not likely until around the latter half of next year, following adjustments for excessive plant and equipment, as well as staffing levels.
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