OECD to Japan: Don't increase interest
By SHINICHI TERADA Staff writer
The Bank of Japan should avoid raising
interest rates until the specter of deflation has vanished, the Organization for
Economic Cooperation and Development said Monday.
"Further hikes would not be warranted
until inflation is firmly positive and the risk of renewed deflation is
negligible, hence avoiding the risk of derailing the expansion," the
Paris-based OECD said in a report on the Japanese economy.
The 2008 OECD Economic Survey of Japan
comes at a time when the economic outlook is clouded by growing concerns about
global growth triggered by the U.S. subprime housing loan crisis.
The central bank has maintained its key
interest rate at 0.5 percent, the lowest among industrialized countries, since
it doubled the rate in February 2007.
Core consumer prices, excluding volatile fresh food, rose 1.0 percent in
February from a year earlier, the sharpest rise in a decade as companies
passed on higher oil prices and rising materials costs to consumers through
a series of price hikes. Core consumer prices are widely seen as a measure of inflation.
"Waiting until inflation is
significantly above zero would support the expansion and reduce the risk that a
negative shock could push Japan back into deflation," the OECD said.
It predicted that the economy will grow 1.6 percent this year, keeping
its forecast unchanged from December. Japan expanded 2.1 percent last year, the OECD said.
The economy will expand 1.8 percent in
2009, supported by strong corporate investment and exports, the OECD forecast.
The Japan Times: Tuesday, April 8, 2008
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