Posted on 07/07/2006 2:15:57 AM PDT by TigerLikesRooster
BOJ urged to monitor missile test reaction
By YURI KAGEYAMA, AP Business Writer
1 hour, 1 minute ago
Japan's finance minister urged the central bank Friday to watch the market reaction to North Korea's recent missile tests, ahead of the Bank of Japan's meeting next week when the bank may raise interest rates for the first time in six years.
Finance Minister Sadakazu Tanigaki has repeatedly urged the bank to refrain from an early hike in rates, which have been at zero the last five years, so as not to hurt the nation's economic recovery. The bank's policy board meets July 13-14.
"It's necessary for the Bank of Japan to thoroughly debate on how recent missile tests may affect the markets and then carefully make a judgment," Tanigaki said.
Tokyo stocks finished flat Friday after falling Wednesday and Thursday after North Korea fired seven missiles early Wednesday. All of them apparently landed harmlessly in the ocean.
Tanigaki's message conflicts with comments Thursday from Chief Cabinet Secretary Shinzo Abe, who said there was no need for the central bank to take the North Korean acts into consideration. Abe also said the launches would have no impact on Japan's economy.
That's probably true given that Japan has very limited trade with North Korea. But nervousness about regional instability could indirectly hurt global economies by dampening market sentiments and sending share prices lower.
Tanigaki said the central bank needs to support the economy through its monetary policy as Japan is faced with little risk of accelerating inflation.
For years, Japan has been plagued by the opposite problem, deflation, in which prices keep dropping, eroding profits and paychecks. But recent data has showed that prices are rising again, with core consumer prices increasing 0.6 percent in May, the seventh monthly gain.
"We need to make economic growth sustainable" while inflation concerns are low, Tanigaki told reporters. "I believe it's necessary (for the Bank of Japan) to firmly support the economy through monetary policy."
The Bank of Japan is in principle independent from political pressures. But Japanese politicians often express views on what the bank should do, partly to gain points with public opinion.
Japan's economy has been on the upswing. A news report Friday said the Cabinet Office expected to raise its growth projection 0.2 percentage point for the year through March 2007 to 2.1 percent.
The Cabinet Office had projected in January that Japan's economy would grow 1.9 percent in fiscal 2006.
With the economy recovering, many investors and analysts expect the central bank to raise interest rates next week to 0.25 percent from zero — or at the next meeting in August. The bank has not raised interest rates in nearly six years and has kept rates at zero since March 2001.
The first economic fallout from NK missile launch?
It apparently hasn't worked though, because they haven't taken care of the problem. Not much of a surprise, most guvmts can't find their feet with both hands.
Of course, what I mean is the THREAT of a militarized Japan. An actual militarized Japan should scare us more than the koreans.
You can get a reaction to Korea in America by watching the gas prices. For that matter you can find out if a goat farts in Afghanistan the same way. Prices go up in America in accordance with anything bad in any part of the world.
No, I don't think this is unusual. The BOJ does a lot of confidence monitoring as part of its regular routine. The BOJ's tankan survey, which measures business confidence, is widely followed.
A full militarization of Japan to counter the real threat of North Korea, probably cannot be stopped now. We still have the entire Pacific Ocean between us and them. Would never help militarize Mexico to counter Venezuela though. Logistics are probably the primary issues.
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