Japan’s central bank is expected to keep interest rates unchanged at the end of its two-day meeting this week. The Bank of Japan’s president recently expressed concern that a downturn in the US economy could slow global growth. That suggests interest rates there won’t be raised anytime soon. At the moment it stands at 0.5%.
As the bank’s policymakers met, further pressure was placed on them to keep the cost of borrowing low to encourage the economy to grow. The Japanese government sharply downgraded its initial growth forecasts for the current fiscal year.
It said GDP will expand by 1.3%, rather than the previously anticipated t2% because of building regulation changes unrelated to the US housing slump.
However, for the financial year starting in April 2008 the government is forecasting growth of 2%. It believes that will be fuelled by domestic demand rather than exports but warned growth could suffer if the US slowdown continues.