Central bank downgrades Japan’s economic forecast
JAPAN has prolonged emergency measures designed to ease the flow of credit to companies, as the country’s central bank downgraded its economic outlook.
The Bank of Japan revised its April forecast of a 3.1 per cent contraction in 2009 to a record 3.4 per cent decline and extended emergency procedures to buy corporate debt from banks and give them unlimited loans, past an initial deadline of 30 September.
The bank’s governor Masaaki Shirakawa said: “Financial conditions are improving but companies are still unconfident about the outlook for borrowing.”
“The Bank is definitely correct when it says the economy overall has stopped worsening,” said Nikhilesh Bhattacharyya of Moody’s.
The central bank had some 473bn yen (£3.1bn) of securities bought from struggling lenders as of 10 July and has also provided banks with unlimited three-month loans at 0.1 per cent.
The forecast of a 3.4 per cent GDP contraction in the year ending March 2010 would be a record since the Second World War, with the economy a key issue ahead of Japan’s general election on 30 August.