Bank of Japan cut interest rate by 20 basis points

A Japanese bank note is displayed at a museum of the Bank of Japan
in Tokyo October 31, 2008. The Bank of Japan is poised to join
a global wave of interest rate cuts on Friday to fight the world's worst financial crisis
in 80 years, and also to slash its growth outlook for
an economy heading towards recession.
REUTERS/Kim Kyung-Hoon (JAPAN)
The Bank of Japan cut its benchmark interest rate to 0.3 percent in a split decision to help stave off a prolonged recession. The rate cut comes two days after the U.S. Federal Reserve cut rates by 0.5 percentage point to 1 percent. China, Hong Kong and Taiwan also cut rates this week, with the European Central Bank and Australia seen following suit next week, in the midst of a sharp deterioration in major economies.

On the vote of the governor after a 4-4 split on the policy board, the central bank trimmed its key interest rate to 0.3 percent from a decade-high 0.5 percent, despite knowing the reduction would have little economic impact as Japan feels the pain from the financial crisis.

Governor Masaaki Shirakawa, 59, came under pressure to lower borrowing costs for the first time in seven years after the Nikkei 225 Stock Average slumped to the lowest level since 1982 on concern that the global financial rout would deepen Japan's downturn. Until today, the bank had stayed on hold in the face of cuts by counterparts worldwide, arguing rates were already "very low".

The markets had widely expected a cut to 0.25 percent and Yuji Saito, head of fx sales at Societe Generale in Tokyo, said the split decision and smaller cut may send the wrong signal. Today's decision may give an impression to foreign investors that the Bank of Japan will not be able to manage rate decision flexibly.

A man walks past a poster showing a bank's a deposit rate
in Tokyo October 31, 2008. The Bank of Japan is poised to
join a global wave of interest rate cuts on Friday to fight
the world's worst financial crisis in 80 years, and also to slash
its growth outlook for an economy heading towards recession.
REUTERS/Kim Kyung-Hoon (JAPAN)
Related Posts :

1. Davidson Sees Threat to Dubai Economy From Credit
2. An Interview with Joseph Stiglitz
3. UBS Analyst: Equities will go higher in six to twelve months
4. Japan announced a 27 trillion yen ($275 billion) stimulus package

Sources :

1. Reuters: WRAPUP 3-Divided Bank of Japan trims rates as crisis bites, October 31, 2008 01:52am EDT
2. Bloomberg: BOJ Cuts Rate to 0.3%; Shirakawa Casts Deciding Vote (Update3), October 31, 2008 03:22 EDT

Please Note!

This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer on the bottom for more information.

You are welcome to republish this article, or any portion thereof.
Please, cite the actual/original source. I would be grateful if you could link back.