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24 Mar 2008 09:38
Masaaki Shirakawa, the Bank of Japan’s acting governor, has warned that the country’s economy faces an uncertain future. It comes at the end of a week in which the Nikkei share index sank to its lowest level for almost three years.
“To deal appropriately with the turmoil in international financial markets is the most important task,” Shirakawa said after his appointment on Thursday.
The acting governor, who took up the post after Parliament failed to agree on a long-term appointment, responded cautiously to suggestions that he would follow the example of the United States Federal Reserve and cut interest rates.
“When the economy changes, it changes very quickly in both directions,” he said.
Some have suggested that Shirakawa could be about to lower the bank rate, which is at 0,5%. In its March report, the government said the economy was at a standstill. The appreciation of the yen is hitting exporters and rising oil prices are squeezing margins.
Most analysts doubt his appointment will result in a major policy shift or that the leadership vacuum at the central bank—which is without a governor for the first time in 80 years—will damage confidence in the world’s second-largest economy.
“The financial markets don’t seem worried, so you would struggle to make a case that the Bank of Japan issue is having a negative impact,” said Richard Jerram, chief Japan economist at Macquarie Securities in Tokyo.
Jerram said he believes Japanese banks have come clean about their losses. “People don’t appreciate the strength of regulatory scrutiny here. The problems of 10 years ago aren’t there any more. The argument that because they hid losses then they must be doing the same again just doesn’t stand up.”
Early last week the Nikkei 225 sank to its lowest level since August 2005 but, buoyed by the Fed’s rates cut and better-than-expected earnings reports by US investment banks, rose on three successive days to close at 12 482,57 on Friday. And there was a glimmer of hope for exporters when the dollar crept back up towards the 100-yen mark after sinking to a 13-year low, below 96 yen.—guardian.co.uk Â
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