Normalisation of interest rates in Japan has been put off again. Reuters reports the latest BoJ forecasts.
Japan's central bank, facing sharply weakening growth in the economy as soaring raw materials costs bite, gave up its long-standing bias to raising rates on Wednesday and governor Masaaki Shirakawa warned that downside risks were likely to dominate over the next year.
"If we look at the prospects for 2008/09, we are putting more emphasis on downside risks than on upside risks," Shirakawa told a news conference after a review that held Japan's key interest rate unchanged at a low 0.5 percent, as expected.
For the first time in two years, the bank dropped from its half-yearly report on the economy its mantra of gradually "adjusting" Japan's low rates towards more normal levels.
The BOJ cut its growth outlook for the year to next March to 1.5 percent from a previous 2.1 percent forecast and almost tripled its inflation outlook to 1.1 percent for the year, up from 0.4 percent in its last half-yearly report in October.
There were plenty of economic data out of Japan today, and as the Reuters report said, they were "almost relentlessly downbeat".
The downgraded in Japan's growth outlook followed the release of figures showing its industrial output fell 3.1 percent in March -- the biggest monthly fall for at least five years and far bigger than market forecasts for a 0.8 percent drop...
Seasonally adjusted unemployment dipped to 3.8 percent in March, government figures showed. That was better than the flat 3.9 percent expected by economists, but they focused instead on a fall in the ratio of job offers to job seekers.
The ratio slipped to 0.95, meaning 95 jobs were available per 100 applicants, below a median forecast of 0.96 and continuing a fall from a peak of 1.07 last June...
Overall household spending fell 1.6 percent in March from a year earlier in price-adjusted real terms, countering a median market forecast for a 0.5 percent increase and further signaling weak consumer spending...
... Housing starts, hit by a regulatory change last year, fell 15.6 percent in March from a year earlier, government figures showed, below a median market forecast for a 6.7 percent drop.
The NTC Research/Nomura/JMMA Purchasing Managers Index, which gives an early snapshot of the health of manufacturing, declined to a seasonally adjusted 48.6 in April from 49.5 in March and was the lowest since 48.1 in February 2003. A reading below 50 points to a contraction in manufacturing activity.