Friday, 13 July 2007

South Korea raises rates, Japan waits

South Korea has climbed on board the tightening bandwagon. AFP/CNA reports:

South Korea on Thursday raised its key interest rate for the first time in almost a year in an apparent attempt to curb high liquidity growth.

At its monthly rate-setting session, the Bank of Korea increased the July target for the call rate by 0.25 percentage point to a six-year high of 4.75 percent.

However, Japan, as expected, left interest rates unchanged yesterday. Bloomberg reports:

The Bank of Japan voted 8-1 to keep its benchmark interest rate unchanged as it waits for more proof that economic growth will be sustained and inflation will take hold. Board member Atsushi Mizuno opposed the decision.

Governor Toshihiko Fukui and his policy board colleagues held the key overnight lending rate at 0.5 percent at a two-day meeting that ended today, the central bank said in Tokyo.

Policy makers are confident in their outlook for the economy, though they want to examine more data before increasing borrowing costs, Fukui said. The Bank of Japan will probably raise the key rate, the lowest among major economies, next month, according to economists and investors.

Yesterday also saw the Ministry of Economy, Trade and Industry releasing revised data showing that industrial output in May fell 0.3 percent from April. The initial estimate was a decline of 0.4 percent.

On Wednesday, the Cabinet Office had reported that its consumer confidence index dropped to 45 in June, the lowest since December 2004, from 47.3 in May. However, Japan's current account surplus widened 31 percent in May from a year earlier to 2.13 trillion yen ($17.5 billion).

In other data on trade, the Commerce Department reported yesterday that the US trade deficit widened in May by 2.3 percent to US$60 billion from US$58.7 billion in April.

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