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Saturday, Oct. 14, 2006

Nuke test casts cloud over markets: Fukui


Staff writer

The nuclear test North Korea claimed it conducted Monday will negatively effect Japan's economy, Bank of Japan Gov. Toshihiko Fukui said Friday.

"North Korea's situation and other geopolitical risks around the world will negatively affect the thinking of financial and international commodity market players, and thus the economy and price trends," Fukui told a news conference.

In the short term, however, the incident will have a limited impact on the Japanese and global economies since trade with North Korea is small, Fukui said, vowing the BOJ will closely monitor the situation.

Fukui made the remark after the BOJ Policy Board unanimously agreed earlier in the day to maintain its target benchmark interest rate at 0.25 percent after a two-day meeting.

Fukui, however, did not rule out another rate hike by year's end, saying he is open-minded.

"We will slowly adjust interest rate levels after carefully considering the economic conditions and price trends," he said.

"I cannot deny the possibility (of a hike) by the end of the year . . . but we have not decided on the time."

In its monthly report on economic and financial development, the central bank said the economy was expanding moderately and will continue to do so, retaining the same phrase it used in September.

The BOJ changed the wording on domestic corporate goods prices, saying the pace of price increase is expected to slow in the future due to falling international commodity prices, including oil.

Omi: What deflation?

Kyodo News Finance Minister Koji Omi said Friday the economy is in very good shape and has effectively moved out of deflation, although the government stopped short of formally announcing an end to deflation in its monthly economic report released Thursday.

"The overall economy is getting very good, though some parts remain not necessarily so," Omi said in a news conference, wondering out loud whether it is appropriate to say the economy has left deflation behind.

Omi admitted the Cabinet Office has adopted a set of conditions, including the consumer price index, to determine whether the economy has emerged from deflation.

He also said economic and fiscal policy minister Hiroko Ota will handle the matter.

He voiced optimism over the course of the economy.

"The economy continues to notch steady growth, and I am not worried about the prospects, much," he said.



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