Japan's central bank seeks to boost lending

The central bank of Japan has increased a stimulus measure, they want to encourage Financial institutions to lend more money.

The central bank has doubled the amount of cheap short-term loans that it is offering to the banks.

The scheme the central bank uses for lending money at a rate of 0,1% was introduced in December to try to tackle the deflation which is threatening Japan’s economic recovery. They want to help the economic recovery by lowering the cost of lending. So the bank voted to hold interest rates at 0,1% the level which they have been since December 2008.

The economy in Japan grew less than first was expected in the final quarter of 2009. The Cabinet Office said the economy expanded by 0.9% between October and December of last year, but they estimated it would be 1,1%.
The bad revision increased the pressure on the Bank of Japan to ease monetary policy. However, with interest rates already down to 0,1% they do not have much room to move.

The continuining process of deflation is not good for an economy as it tends to make consumers and businesses delay major purchases in the expectation that prices will fall further in the future.

I think that with the measures they took they should be able to stop the deflation and so help to recover their economy. It is hard for a lot of countries in the world to keep their chin up in time of the crises, but everything will fall back into place I guess.

Thibaut Delsoir

source: http://news.bbc.co.uk/2/hi/business/8571624.stm