Japan raises interest rates

The central bank affirms its independence as politicians voice worry over economy.

    Toshihiko Fukui, the BOJ governor, says the economy is likely to grow further [AP]
    In pushing up the cost of money at a time when many politicians have expressed concern about the Japanese economy, the central bank has underlined its independence.
     
    Rift
     
    but some analysts believe the BOJ's hawkish stance now may influence the Japanese government when it nominates future board members in two months, when the terms of two of the nine board members expire.
     
    Glenn Maguire, chief economist at SG Hong Kong, said the likelihood of further rate rises had been reduced.
     
    "It will be difficult to do anything before the second half of this year," he said.
     
    "By moving against the government's clear stance on interest rates, the likelihood is that more dovish members will be nominated to the board."
     
    The government, playing down the idea of any rift, said its monetary policy was up to the BOJ.
     
    Major policy move
     
    Koji Omi, the Japanese finance minister, told parliament: "I understand the BOJ reached its conclusion after a thorough examination and discussion."
     
    But a ruling party heavyweight, Hidenao Nakagawa, was quick to say the BOJ would be held responsible for its rate hike decision.
     
    Japanese politicians are sensitive about the economy ahead of the parliament's upper house election in July.
     
    The rise marks the third major policy move in less than a year.
     
    Last March, the BOJ ended its so-called quantitative easing policy of pumping excess money into the banking system.
     
    In July it followed up with a rate rise to 0.25 per cent from virtually zero, the first rate increase in six years.

    SOURCE: Agencies


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