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Worst of Japan's recession 'over' Japan economic outlook downgraded
(about 2 hours later)
Japan's central bank has said that the worst of the country's recession is now over, after it decided to keep its key interest rate on hold at 0.1%. Japan's central bank has downgraded its economic forecast for the current financial year, but has reiterated that the worst of the recession is over.
In a statement, the Bank of Japan said that "Japan's economic conditions have stopped worsening". The Bank of Japan now expects the economy to shrink 3.4% in the 12 months to 31 March 2010, a deeper contraction than its previous forecast of -3.1%.
However, in a statement the central bank said that "Japan's economic conditions have stopped worsening".
It said both industrial production and exports were now starting to improve.It said both industrial production and exports were now starting to improve.
It also said it would continue efforts to improve lending to firms, such as buying corporate bonds from commercial banks, for another three months.It also said it would continue efforts to improve lending to firms, such as buying corporate bonds from commercial banks, for another three months.
Comments 'correct'Comments 'correct'
Despite continuing weakness in consumer spending, the bank expects the Japanese economy to start to recover in the second half of this year.Despite continuing weakness in consumer spending, the bank expects the Japanese economy to start to recover in the second half of this year.
Japan's economy contracted at an annual rate of 14.2% between January and March, its sharpest decline on record. Japan's economy contracted at an annual rate of 14.2% between January and March, its sharpest decline on record. Figures have yet to be released for the April to June quarter.
However, recent official figures showed that the country's industrial output rose by 5.7% in May, compared with April. However, recent official data showed that the country's industrial output rose by 5.7% in May, compared with April.
Analysts broadly welcomed the Bank of Japan's comments.Analysts broadly welcomed the Bank of Japan's comments.
"They are definitely correct when they say the economy overall has stopped worsening," said Nikhilesh Bhattacharyya of Moody's Economy."They are definitely correct when they say the economy overall has stopped worsening," said Nikhilesh Bhattacharyya of Moody's Economy.
"Industrial production grew probably at a record pace in the second quarter, based on April and May it looks like that.""Industrial production grew probably at a record pace in the second quarter, based on April and May it looks like that."