TOKYO – Concerned about the sputtering economy, Japan’s central bank is likely to cut a key interest rate to zero, reviving a policy it abandoned in August 2000, reports said Thursday.
The expected cut in the rate for overnight loans between banks could come when Bank of Japan policy makers meet Monday, and reflects the central bank’s worries that a recent drop in stock prices and a global economic slowdown are endangering Japan’s chances of economic recovery, several newspapers said.
The BOJ is expected Monday to downgrade its assessment of the economy, paving the way for a change in rates, the Nihon Keizai financial daily said Thursday.
The report, which cited anonymous sources at the central bank, said the lender is concerned that slowing growth worldwide is cutting into earnings at many Japanese companies and creating deflation — a fall in prices that further pressures corporate profits and dampens consumer spending.
The nationwide Yomiuri and Mainichi newspapers carried similar reports.
BOJ Governor Masaru Hayami said during Parliamentary testimony Thursday that the central bank is prepared to continue carrying out “appropriate monetary policy” but that no decision on interest rates had been reached.
Highlighting jitters over the economy, Tokyo stock prices tumbled early Thursday.
Politicians in the ruling Liberal Democratic Party have pressured the BOJ to keep rates as low as possible.
The central bank has long maintained a policy of very low rates to help the country pull out of more than a decade of economic stagnation.
A decision to lower rates would mark the Bank of Japan’s second move to jump-start the economy in less than a month.
Last month, the bank decided to lower its rate for overnight interbank loans by 0.1 percentage point to 0.15 percent.
That reversed a decision in August, which had raised the rate target for the first time in 10 years.
The central bank at that time also lowered its official discount rate on central bank loans to banks by 0.1 percentage point to 0.25 percent.
