Official figures have established that consumer prices fell by a record 1.7% in Japan, driven by consistently falling fuel costs. This has led to the key interest rate being left unchanged by Japan’s central bank, reinforcing its cautious outlook for the economy.
It was unanimously agreed by the board of the Bank of Japan to keep interest rates at 0.1%. The bank said that unemployment would stay high and consumer spending likely to remain low, even though the Japanese economy had stopped depreciating.
Japan’s central bank is not expected to raise rates for some time, which have been on hold since December, when they were reduced from 0.3%. According to a report by the Cabinet office, the economy was “picking up” but continued to remain in a “difficult situation”.
The Japanese economy, which is heavily reliant on exports, has been badly hit by the slowdown in overseas demand and is expected to shrink by 3.4% leading to March 2010.
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