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Saturday, May 24, 2008

BOJ chief willing to cut rates as economy slows

Staff writer

Bank of Japan Gov. Masaaki Shirakawa said Friday he will not rule out lowering the BOJ's benchmark interest rate from the current 0.5 percent amid the slowing economy.

News photo
In the money: Bank of Japan Gov. Masaaki Shirakawa faces reporters Friday at the BOJ building in Tokyo. SATOKO KAWSAKI PHOTO

"We will manage monetary policies without the assumption of either raising or lowering" the rate, Shirakawa said in a media interview.

His remark suggests the BOJ, which considers the current rate too low and wants to "normalize" it in the long run, will not hesitate to cut the rate if necessary.

Shirakawa attributed the recent slowdown to various factors, including the fall in housing starts due in part to the revised Building Standards Law that took effect last June and the financial market turbulence over the U.S. subprime loan crisis.

The building standards revision, which raised the penalties for architects who fabricate data, was intended to make buildings safer, but the complicated procedures for getting permits from local governments delayed construction starts.

"But even if there is a further slowdown, there is little chance the Japanese economy will suffer a huge impact because investment, inventory and employment are not excessive," Shirakawa said.

After working as a career bureaucrat at the BOJ for 34 years, Shirakawa retired and began his second career as an economics professor at Kyoto University in 2006.

A native of Fukuoka Prefecture, Shirakawa took the BOJ helm last month after being appointed one of the deputy governors in March.

The head post had been vacant for three weeks because the Democratic Party of Japan-led opposition, which has control of the Upper House, blocked two nominees submitted by the government in March.

In fact, the deputy governor post as well as one of the nine BOJ Policy Board members remain vacant to this day. But the government seems to be finally gearing up to pick fresh nominees.

Earlier this week, Chief Cabinet Secretary Nobutaka Machimura said he may submit nominees for the two vacant posts by the end of this month so the Diet can endorse them by June 15 when the legislative session ends.

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The Japan Times

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