Japan Growth Paltry 0.1%

By Stewart Douglas

The Japanese economy has grown by a poor 0.1% over the second quarter of this year, leading to ongoing speculation as to the future of interest rates.

The growth of just 0.1% reflects the impact of previous economic control measures, and has led to the revision of interest rate forecasts for the coming few weeks.

The Japanese economy, which has come under threat of inflation and over-active growth in recent months, appears to be under control after the Bank of Japan set interest rates at a half a percent.

Analysts had expected a quarter of a percentage point rise in rates to 0.75% this month, which has now been revised for a later date after the low growth figures.

Adding to the revised forecast has been the volatility in world trading and continued underlying problems within the US sub-prime mortgage lending market.

Interest rates had been designed with calming economic growth in mind, and the figures today appear to show the extent of the impact of current interest rates on economic growth over the last month.

With wider macro-economic objectives apparently under control, experts see no reason for the bank to further raise interest rates this month.

With many analysts forecasting a growth of 0.2% over the same period, the slower growth is thought to mean the Bank will put off further interest rate increases until at least next month.

The news came on the same day as the Japanese central bank pledged a further 600 billion yen to Japanese financial markets, after worldwide fears of a credit crunch and subsequent recession.

Alongside both the European Central Bank and the Federal Reserve, the Bank of Japan unveiled a two-stage cash invest plan to prevent stagnating credit and pending liquidity problems amongst its banks and mortgage lenders.