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Friday, Oct. 12, 2007

No change as BOJ keeps rate at 0.5%

Staff writer

The Bank of Japan Policy Board agreed Thursday to maintain its benchmark interest rate at 0.5 percent for the eighth straight month as prospects for the global economy remain uncertain in the wake of the U.S. subprime mortgage loan crisis.

After a two-day meeting, board members voted 8-1 to keep the interest rate unchanged. Board member Atsushi Mizuno voted for a rate hike for the fourth consecutive month.

BOJ Gov. Toshihiko Fukui said the U.S. and European financial markets are showing signs of improvement since last month's Policy Board meeting but the global economy in general is still unstable.

"The most important point is how the (situation) in the market will affect the economy," he said. "We will closely monitor it."

The central bank's policymakers are expected to continue to explore the appropriate timing to raise the interest rate. But many analysts predict the BOJ will be forced to retain the current rate for now.

"Policymakers still need to closely assess whether (the U.S. subprime loan crisis) has any negative affect on the economy," said Yasuhide Yajima, senior economist at NLI Research Institute, in his report on Oct 5. "The BOJ will have to wait (for a rate hike) for the time being."

Last week, the European Central Bank kept its benchmark rate unchanged at 4 percent. The U.S. Federal Reserve cut its key rate by 0.5 percent to prevent the housing loan crisis from dragging the economy into recession.

The BOJ is expected to review its economic outlook report later this month.

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The Japan Times

Article 3 of 6 in Business news

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