07-15-2008
The Bank of Japan cut its economic growth forecast, raised its inflation estimate and kept the benchmark interest rate at 0.5 percent, saying higher commodity prices are hurting expansion. The world's second-largest economy will grow 1.2 percent in the year ending March 31, slower than the 1.5 percent forecast on April 30, the central bank said in a statement in Tokyo. Consumer prices excluding fresh food will climb 1.8 percent, more than the 1.1 percent projected three months ago, it said. Growth is “slowing further” because higher energy and raw-materials costs are discouraging businesses and consumers from spending, the bank said. Governor Masaaki Shiirakawa has said the risk that record commodity costs will weaken spending and derail growth is more pressing than tackling inflation. The Bank of Japan regards core prices as stable when they are between zero and 2 percent. The yen traded at 105.85 per dollar at 2:32 p.m. in Tokyo compared with 105.80 before the announcement. Government debt held gains, sending the yield on the 10-year bond 4.5 basis points lower to 1.535 percent.