Bank Of Japan maintains ultra low interest rates

Bank Of Japan maintains ultra low interest rates

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On May 23, 2012 the Bank Of Japan maintained its key interest rate unchanged between zero and 0.1 %. The bank also said that it would leave a 70 trillion yen asset purchase programme in place.

The unanimous decision to maintain the interest was taken after a two-day policy board meeting the nation’s central bank. It was also noted that the years of deflation continued to take a toll on the world’s third largest economy.

A statement said, “The bank recognizes that Japan’s economy faces the critical challenge of overcoming deflation and returning to a sustainable growth path with price stability”. Last month the Bank Of Japan rolled out the latest series of easing measures so as to halt the damaging spiral of falling prices.

It says that it would hike its asset purchase programme by 5 trillion yen to the current 70 trillion yen. This might be a good news for the individual consumers but the falling prices are bad for the economy as a whole as they encourage the shoppers to put off purchases with the hope that they will pay even less for the goods in the future. The cut in the corporate profits are seen as they are unable to see future demand.