Despite the Japanese economy shrinking in the first quarter, the Bank of Japan did not add to monetary stimulus on Friday. AFP/CNA reports:
The Bank of Japan on Friday left its key rate unchanged at between zero and 0.1 per cent as it continues to assess measures to soothe an economy pushed into recession by the March 11 earthquake and tsunami.
"Japan's economy faces strong downward pressure, mainly on the production side, due to the effects of the earthquake disaster," the central bank said in a statement...
In its assessment Friday, the BoJ said the economy "is expected to return to a moderate recovery path from the second half of fiscal 2011 as supply-side constraints ease and production regains traction."
The BoJ's counterpart in China was also in the news on Friday. Again from AFP/CNA:
The head of China's central bank said Friday too many people were saving too much money, which could lead to asset bubbles, adding Beijing had to find a way to promote growth and curb inflation...
"China is an economy with a high savings rate, which may lead to high investments and may cause overheating and overcapacity in some sectors and fuel bubbles," Zhou Xiaochuan, governor of the People's Bank of China, said...
Zhou said the outlook for the global economic recovery was clearer now than last year but many uncertainties remained.
He added that China needed to take "counter-cycle" policies as its economic cycle was different from that of developed nations...
Zhou also reiterated China would take a "gradual" approach to making the yuan fully convertible, as Beijing continues to promote the international status of the currency.
While China worries about excessive savings, Europe has debt problems that threatened to get worse on Friday. From Bloomberg:
Greek bonds led declines among peripheral euro-area nations, sending 10-year yields to a record, on concern a restructuring of its debt would reignite Europe’s sovereign-debt crisis.
The spread, or yield difference, between benchmark Greek debt and German bunds widened to the most on record. Fitch Ratings said it downgraded Greece’s credit ratings by three levels to B+ from BB+, four notches below investment grade. German bonds rallied as European Central Bank Council member Jens Weidmann said the bank may no longer be able to accept Greek bonds as collateral if maturities are extended, stoking demand for the relative safety of Europe’s benchmark debt...
Yields on 10-year Greek debt surged 59 basis points to a record 16.59 percent, and was at 16.57 percent as of 4:45 p.m. in London. The 6.25 percent security due in June 2020 dropped 1.705, or 17.05 euros per 1,000-euro face amount, to 53.17. Two- year note yields jumped 36 basis points to 25.22 percent.
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