Wednesday January 17, 2007

Bank of Japan to meet amid mounting speculation of interest rate hike

TOKYO (AP) - The Bank of Japan was to begin a much-watched policy meeting Wednesday amid mounting speculation that the central bank may raise interest rates for the first time since July.

Ahead of the meeting, government officials were sending mixed signals about the possibility of a hike.

Finance Minister Koji Omi said Tuesday the economy is on a "sound footing'' and that there is no need to pressure the BOJ into delaying an interest rate increase.

But Prime Minister Shinzo Abe and Economy Minister Hiroko Ota urged caution, saying BOJ policy should support strong and stable economic growth.

The central bank raised interest rates in July for the first time in six years to 0.25 percent from virtually zero, promising further hikes amid signs of an economic recovery.

Some government ministers have expressed concerns, however, that the bank could repeat the mistake it made in August 2000, when it lifted borrowing rates prematurely _ and choked a recovery. A senior ruling party official has even threatened that the government may demand the bank put off a decision to tighten credit.

The Japanese economy has been experiencing its longest period of growth since World War II, with land prices rising for the first time in over a decade and companies booking record profits.

But a key question remains as to whether Japan has soundly beaten the danger of deflation, a continuous drop in prices that weakens economic activity. The country's nationwide core consumer price index rose 0.2 percent on year in November, registering the sixth straight month of increases. - AP

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Wednesday January 17, 2007

Bank of Japan to meet amid mounting speculation of interest rate hike