Bank of Japan expands stimulus as GDP poised to decline

Rate Held

The BOJ maintained its benchmark interest rate between zero and 0.1 percent and the amount of monthly bond purchases at 1.8 trillion yen. The asset purchase fund has been its main policy tool since its introduction in October 2010.

Japan’s industrial production fell a more-than-expected 4.1 percent in September from the previous month, the steepest since last year’s earthquake and tsunami, data showed today before the bank’s meeting. Exports dropped 10.3 percent from a year earlier and retail sales rose less than forecast in September, data showed this month.

Honda Motor Co., Japan’s third-largest carmaker, yesterday cut its full-year profit forecast after Chinese consumers shunned Japanese brands amid a territorial dispute between Asia’s two-biggest economies. Canon Inc., Nintendo Co. and Kawasaki Heavy Industries Ltd. revised down their forecasts last week.

Fiscal Stimulus

Japan announced 750 billion yen of fiscal stimulus on Oct. 26 amid concerns over financing more spending, as opposition lawmakers block a bill allowing the government to borrow 38.3 trillion yen for this year’s deficit amid a dispute over the timing of an election.

Central banks from Australia to South Korea have reduced their key rates this month. Earlier today, India’s central bank cut lenders’ reserve requirements while leaving interest rates unchanged. The International Monetary Fund trimmed its global growth forecast to 3.3 percent this year as the euro area’s debt crisis threatens the world economy.

In the U.S., stock markets were prevented from opening by Sandy, the Atlantic Ocean’s biggest-ever tropical storm. Strong winds and rain roared ashore late yesterday and disrupted commerce, transportation, utilities and government services from Boston to Washington.

The S&P/Case-Shiller index scheduled for release today may show property values in 20 U.S. cities increased 1.9 percent in August from a year earlier, according to the median estimate of economists surveyed by Bloomberg News.

In Europe, Spain’s gross domestic product contracted 1.6 percent in the third quarter from a year earlier, Germany’s unemployment rate probably rose to an 11-month high of 6.9 percent in October and euro-area consumer confidence hovered near the lowest level since 2009.

Bloomberg News

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