BOJ seen keeping rates near zero: Analysts<\/p>\n
TOKYO (Bloomberg): Bank of Japan policymakers will probably
\nkeep interest rates near zero when they meet Monday, because the
\neconomy is growing slowly and there is no sign of inflation,
\nanalysts said.<\/p>\n
The central bank's quarterly Tankan business survey last week
\nshowed major companies plan to increase spending on new factories
\nand equipment this fiscal year, boosting growth prospects. Those
\nupbeat plans aren't shared by smaller companies, and managers
\nwant to shed staff to cut costs.<\/p>\n
\"The Tankan shows the economy is taking off, but with only one
\nengine working,\" said Yasunari Ueno, chief market economist at
\nFuji Securities Ltd. \"A surge in capital investment hasn't spread
\nacross the board, and we can see no signs toward better consumer
\nspending.\" Ueno expects the BOJ to keep rates near zero until at
\nleast the middle of next year.<\/p>\n
Consumer spending, which accounts for about 60 percent of the
\neconomy, won't turn around until the jobless rates stops rising,
\nanalysts said. The unemployment rate rose to a record 4.9 percent
\nin February and could have topped 5 percent in March, government
\nofficials said.<\/p>\n
The Bank of Japan's policy meeting heads the list of the main
\neconomic events in Asia this week, including the release of Hong
\nKong's February retail sales report on Friday. Koreans go to the
\npolls Thursday to elect a new parliament.<\/p>\n
The Tankan survey, which polled some 9,200 managers on their
\ncompanies' plans, was closely watched by investors and analysts
\nfor clues on when the central bank may ditch its zero-rate
\npolicy, which Governor Masaru Hayami has said is \"abnormal.\"<\/p>\n
\"The Tankan gave no reasons to back speculation that the BOJ
\nwill cancel its zero-rate policy soon,\" said Noboru Kawai, an
\neconomic strategist at Morgan Stanley Dean Witter & Co.<\/p>\n
The BOJ has kept its target for the interbank overnight loan
\nrate, its equivalent of the U.S. Federal Reserve's federal funds
\nrate, at between 0.02 percent and 0.03 percent since March 1999.<\/p>\n
Some investors expect the central bank may raise rates as soon
\nas September or October, citing an improvement in capital
\ninvestment. Hayami last week indicated he's not ready to change
\ntack yet, saying consumer spending must improve before rates can
\ngo up.<\/p>\n
\"Hayami's made it clear that a recovery in consumer spending
\nis crucial in judging when to cancel the zero-rate policy, though
\nthere is no doubt business investment is leading the current
\ngrowth,'' said Masaaki Kanno, chief economist at J.P. Morgan
\nSecurities (Asia) Ltd. He expects the central bank will raise
\nrates in the fourth quarter of the year, when there'll be a clear
\nrecovery in spending.<\/p>",
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"sponsor": "Okusi Associates",
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