Japan economy in lull but further rate cuts risky: BoJ chief
Japan's top central banker said Wednesday that Asia's largest economy would remain sluggish until well into next year, but warned against excessive interest rate cuts that could do more harm than good.
"It is expected that increased sluggishness in economic activity in Japan will remain over the next several quarters and that it will take some time for the necessary conditions for Japan's economic recovery to be satisfied," Bank of Japan governor Masaaki Shirakawa said in a speech.
Japanese economic growth, adjusted for inflation, was likely to be about zero in the current fiscal year to March and 0.5 percent next year, he said.
The Bank of Japan last week joined other world central banks in fighting the global financial crisis with cheaper credit, lowering its key lending rate to 0.3 percent from 0.5 percent previously.
The board was split over the decision, with three members in favour of a larger 25-basis-point cut. Shirakawa, who made the final decision, argued that cutting too much could interfere with the functioning of the money market.
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