Japan growth 'to slow' on US woes

Japanese interest rates have remained unchanged for more than a year

Japan has cut its growth forecast amid continuing worries about the impact of the US slowdown on global markets.

The move came as data showed that Japan's industrial output - a key measure of growth - had slowed sharply in March as exports to the US slumped.

Higher oil and food prices also drove down Japanese household spending, adding to the gloom.

Separately, rate-setters at the Bank of Japan voted unanimously on Wednesday to keep interest rates at 0.5%.

'Growing risk'

With the brakes being put on Asia's largest economy, the central bank cut its economic growth forecast to 1.5% for the year to March 2009, from an earlier forecast of 2.1%.

Government figures showed that industrial output slipped by 3.1% in March from the same month a year ago, while household spending was 1% lower.

"Looking forward, the slowdown phase will continue in the near future," said the central bank's new governor, Masayuki Shirakawa.

"However we see a high possibility that (Japan's economy) will remain on a path of gradual growth."

Japan last raised interest rates in February 2007, to 0.5% from 0.25%.

The central bank has previously promised to increase interest rates slowly from 0.5%, although it is now being more cautious.

Mr Shirakawa said that with the economy slowing more than the bank expected, and with "growing" risks, a more flexible approach to rates was needed.

E-mail this to a friend

Printable version