BOJ Keeps Interest Rate at 0.5%

The Bank of Japan refrained from raising interest rates in the first unanimous decision since June, after business confidence fell and central banks provided cash to counter a credit squeeze that threatens global growth.

Governor Toshihiko Fukui and his colleagues voted to leave the benchmark overnight lending rate at 0.5 percent, the lowest among major economies, the bank said in a statement today in Tokyo. Atsushi Mizuno rejoined the majority after proposing an increase at each meeting since July.

The Bank of Japan today lowered its assessment of the economy, saying the pace of growth will ``slow for the time being.'' The Federal Reserve, European Central Bank and three other central banks this month pledged extra funds to reduce borrowing costs, in the biggest act of international economic cooperation since the Sept. 11 terrorist attacks.

Weak profits at small companies could hamper wage growth and consumer spending, Fukui said this month. He acknowledged that the benefits of Japan's corporate-led expansion aren't flowing to households as quickly as he'd anticipated.

The government slashed its economic growth forecasts yesterday. The world's second-biggest economy will probably expand 1.3 percent in the year ending March 31, slower than a previous forecast of 2.1 percent, the Cabinet Office said. The economy will grow 2 percent next year, less than the 2.1 percent estimated earlier, it said.

Export growth slowed in November, the Finance Ministry said today, as the U.S. housing recession caused shipments to Japan's biggest market to tumble for a third month.

Confidence at Japan's large manufacturers and service companies fell to the lowest in more than two years, the central bank's Tankan survey showed on Dec. 14. Companies surveyed said costs were rising faster than they could pass on to clients.

BOJ Keeps Interest Rate at 0.5%, Reuters
12/20/2007 7:12:32 AM