Bank of Japan holds off easing, warns on ‘uncertainty’
Bank of Japan holds off easing, warns on ‘uncertainty’
The decision came days after the frontrunner to become Japan's next prime minister vowed aggressive monetary easing to fix the nation's financial woes if he is elected next month — a plan rejected by the BoJ's chief.
After a two-day policy meeting, the BoJ said in a statement the European debt crisis, an unsteady US economic recovery and an export-denting territorial spat with China have all weighed on the country's prospects.
"Japan's economy is expected to remain relatively weak for the time being," it said, adding: "There remains a high degree of uncertainty."
The bank's policy board, which also voted unanimously to hold rates between zero and 0.1 percent, said the economy "has been weakening somewhat" because of a slowdown in exports and factory output.
The world's third-largest economy contracted in the July-September quarter, nudging it back towards recession and renewing calls for central bank action.
In October, the BoJ said it would expand an asset-purchase program — its main policy tool — by 11 trillion yen ($135 billion) to 91 trillion yen in a bid to kickstart growth as recovery from last year's quake-tsunami disaster stutters.
The move was the bank's second since its counterparts in the United States and debt-hit Europe announced huge policy easing measures in September to stoke growth.
Pressure for further action spiked last week after Shinzo Abe, leader of the main opposition Liberal Democratic Party, called on the bank to usher in "unlimited" easing and vowed to strike an agreement with it on new measures if he wins December 16 polls, as expected.
The BoJ has also faced calls for more action from the ruling Democratic Party of Japan (DPJ) led by Prime Minister Yoshihiko Noda as tumbling exports to Europe and China, as well as the strong yen, bruise the economy.
Abe has said he would try to force the central bank to buy government bonds — effectively printing money — to generate inflation, in a bid to drag Japan out of the deflationary spiral that has haunted its economy for years.
BoJ Gov. Masaaki Shirakawa hit out at the plan yesterday, saying it was "not implemented in any developed countries", and added that central bank independence was a global standard.
"We need an organization that looks at the economy and finance with a long-term view," he told reporters in Tokyo.
The DPJ and some economists have also criticized Abe's fix for the economy, saying it risked weakening fiscal discipline, possibly with disastrous effects.
"The purchase of government bonds is drastic medicine, a powerful drug that might work, but carries the risk of devastating the whole economy," said Yoshikiyo Shimamine, chief economist at Dai-ichi Life Research Institute.
The measure "would bring about an expectation for inflation... but with unease in the bond market and doubt about the sustainability of Japan's finances, it could only generate stagflation," he said, referring to a situation in which prices rise but the economy stands still.
Tsuyoshi Ueno, senior economist at NLI Research Institute, cast doubt on the likelihood of Abe's proposals seeing the light of day.
"I think his proposals are extreme," Ueno added.
Japan has for years been mired in deflation, which discourages consumers from spending in the hope that products will be cheaper in the future, sapping demand and dissuading firms from investing.
Adding to the economy's more recent woes is a diplomatic row between Tokyo and Beijing over an East China Sea island chain that sparked a consumer boycott of Japanese products, including key exports such as cars and electronics.
Iran rial plunges to new lows as US sanctions loom
- The dollar was being offered for as much as 87,000 rials, compared to around 75,500 on Thursday
- The currency has been sliding for months because of a weak economy
DUBAI: The Iranian rial plunged to a record low against the US dollar on the unofficial market on Sunday, continuing its slide amid fears of returning US sanctions after President Donald Trump in May withdrew from a deal on Tehran’s nuclear program.
The dollar was being offered for as much as 87,000 rials, compared to around 75,500 on Thursday, the last trading day before Iran’s weekend, according to foreign exchange website Bonbast.com, which tracks the unofficial market.
Iran’s semi-official news agency ISNA said the dollar had climbed to 87,000 rials on Sunday from about 74,000 before the weekend on the black market, and several Iranian websites carried similar reports.
The currency has been sliding for months because of a weak economy, financial difficulties at local banks and heavy demand for dollars among Iranians who fear the pullout by Washington from the nuclear deal and renewed US sanctions against Tehran could shrink the country’s exports of oil and other goods.
The fall of the national currency has provoked a public outcry over the quick rise of prices of imported consumer goods.
Merchants at the mobile phone shopping centers Aladdin and Charsou in central Tehran protested against the rapid depreciation of the rial by shutting down their shops on Sunday, the semi-official news agency Fars reported.
A video posted on social media showed protesters marching and chanting “strike, strike!” The footage could not be authenticated independently by Reuters.
Hours later, Information and Communications Technology Minister Mohammad Javad Azari-Jahromi said on Twitter that he visited the protesting merchants.
“I will try to help provide hard currency for (mobile) equipment (imports),” Azari-Jahromi wrote, adding: “The merchants’ activity has now gone back to normal.”
Some of the US sanctions against Iran take effect after a 90-day “wind-down” period ending on Aug. 6, and the rest, most notably on the petroleum sector, after a 180-day “wind-down” period ending on Nov. 4.
The rial has weakened from around 65,000 rials just before Trump’s announcement of the US withdrawal in early May, and from 42,890 at the end of last year — a freefall that threatens to boost inflation, hurt living standards and reduce the ability of Iranians to travel abroad.
In an effort to halt the slide, Iranian authorities announced in April they were unifying the dollar’s official and black market exchange rates at a single level of 42,000, and banning any trade at other rates under the threat of arrest.
But this step has failed to stamp out the unofficial market because authorities have been supplying much less hard currency through official channels than consumers are demanding. Free market trade simply went underground, dealers said.