Tuesday, September 18, 2007

Bank of Japan Does Not Adjust Interest Rates

Sources: Bank of Japan No-Change Decision Likely, Bank of Japan Keeps Interest Rates Unchanged

In a controversial decision, the Bank of Japan concluded that the economy is too fragile to bear an increase in interest rates. Japan's interest rate is currently among the lowest of developed nations. The Bank's board of directors completed a two day meeting during which they entertained the idea of raising rates in response to concerns about the slowdown in the economy's growth after five years of strong and steady growth. The Japanese economy is one of the largest in the world, and its recent growth has been marked its greatest expansion since WWII. The Bank's choice to keep the rates unchanged parallel the U.S.'s strategy in keeping its rate steady despite a slowdown in the American economy.

Some analysts express concern that the board's decision has been influenced by politics. The Bank has only recently won its independence from the government, which had run financial policies until 1998. Some fear that the decision signals a failure by the Bank to flex its independence.


Do you think that the Bank of Japan's decision is that controversial in light of the U.S.'s similar strategy in response to its own economic slowdown?

Is the Bank's response economically sound?

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