Tags: Japan | deflation

Japan Struggles to Slow Creeping Deflation Threat

Wednesday, 02 Dec 2009 12:36 PM

Japan's prime minister and central bank chief held talks Wednesday, vowing to step up cooperation in their effort to pull the nation out of deflation.

Their meeting came a day after the central bank announced a decision to further ease monetary policy by massaging the economy with cheap loans, amid government pressure to respond to a surging yen and falling prices.

Prime Minister Yukio Hatoyama said after the talks that he and Bank of Japan Gov. Masaaki Shirakawa pledged to "take action quickly while sharing the notion that the government and the BOJ need to pull (Japan) out of deflation."

The yen has surged in recent days, and government officials have criticized the central bank as too complacent. The bank has also been under pressure to do something about deflation after months of falling prices.

Before the meeting Wednesday, the Bank of Japan announced that it was supplying 1 trillion yen ($11.4 billion) into the short-term money market in a one-time injection, in line with the latest monetary easing measure.

Shirakawa told reporters that Hatoyama did not press for further measures and added that the two officials were able to "ensure good communication between the government and the BOJ."

In Tuesday's emergency meeting, the central bank voted unanimously to offer about 10 trillion yen ($115.8 billion) in short-term loans to commercial banks to boost liquidity. It also maintained its key interest rate at a super-low 0.1 percent.

The dollar, which fell to a 14-year low of 84.81 yen on Friday, jumped above the 87-yen line following the BOJ decision.

The government is currently compiling additional stimulus measures totaling at least 2.7 trillion yen ($31 billion) to bolster employment and growth.

Recent signs point to a mixed outlook for the economy. Gross domestic product has expanded in the past two quarters but factory output is slowing again. Wages are falling and deflation threatens to undermine the nascent recovery.

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Economy
Japan's prime minister and central bank chief held talks Wednesday, vowing to step up cooperation in their effort to pull the nation out of deflation.Their meeting came a day after the central bank announced a decision to further ease monetary policy by massaging the...
Japan,deflation
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2009-36-02
Wednesday, 02 Dec 2009 12:36 PM
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