The bank of Japan held last Tuesday an emergency meeting to solve the problem of the rising borrowing cost for Japanese companies in this economical crisis. These costs are rising at their fastest pace in ten years.
The bank is under increasing pressure because they provide money to the financial markets aggressively as market rates increase due to the credit crunch.
It’s a fact that the Japanese economy is getting more worse every day. Japanese industrial output and the consumer spending has fallen deeply what encourages the fear that Japan is heading to a recession.
Despite the sad prognosis, economists say that a interest cut would be very good, but cutting further then would have an negative influence on the operations on the money markets.
It’s a good idea to reduce the lending costs because cheaper loans will encourage companies and consumers to borrow more money and they will spend it to consumer products which is exactly what’s necessary to get out of the negative spiral where they are in at the moment. Now it is upon the economist to solve this very difficult balance exercise to find the perfect interest rate that wouldn’t influence the financial market to bad but would encourage consumer spending.
Source: http://news.bbc.co.uk/2/hi/business/7758401.stm
1 comment:
I agree with the idea to reduce lending cost, so consumers would buy more. It's a good idea to get the ball rolling and stimulate the economy
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