Japan leaves key rate unchanged, China ponders keeping policy

Bank of Japan today announced it unanimous decision to keep its key rate steady at 0.1 percent as it waits to see the effectiveness of the programs it has so far put forward.  The last time this rate was changed was in December when it moved from 0.3 to the current 0.1. There was also no word on any extensions to purchase government securities.

The Bank also believes Japan has surpassed the worst but it remained cautious about declining prices.

It is also a tale of declining prices in Beijing after China’s CPI dropped 1.8% and its PPI lost a bigger 8.2%.

In a recent report, China’s central bank forecast CPI would bottom out at the end of the fourth quarter and while prices fell year-on-year, CPI was flat in July from a month earlier, while PPI rose 1 per cent from the previous month.

Due to this, talks of asset bubbles once again forming are tamed.  Furthermore, signs that inflation and strong increases in spending are not yet there tone down talks of any change in policy that aims to boost growth.  With that said, banks are still requested by the government to rein in on lending to ensure that the next bubble is prevented after reports point to an increase in investment in the stock market, funded by strong surge in bank lending.

As a result of the “guidance”, new loans in July slowed sharply to Rmb356bn ($52bn) from Rmb1,530bn in June, according to figures released by the central bank on Tuesday.

More here.

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