Deflationary pressures in the Japanese economy is likely to snuff out any chance of a rate hike from the Bank of Japan until as far as late-2011, BNP Paribas said in a note dated November 20.
The Bank of Japan's Policy Board decided unanimously to maintain the uncollateralized overnight call rate at around 0.10% on Friday. The Board noted that growth is picking up in the economy but acknowledged that this was largely related to policy measures taken at home and abroad.
Meanwhile, the Japanese government has been highly critical of the central bank's policy, saying in its latest monthly report that the economy was in a "deflationary phase," while the OECD urged the bank to implement more quantitative easing measures to fight deflation.
BNP Paribas forecast the current decline in consumer prices to moderate as the effects of changes in energy prices abate, and foresees long-term inflation expectations to remain stable.
"The risks to growth are balanced," said Raymond Van der Putten, an economist at BNP Paribas. "On the one hand, growth could be stronger given the economic developments in emerging and commodity-exporting economies. On the other hand, it could be weaker because of the ongoing deleveraging in the U.S. and Europe."
In all, the firm revised up its growth forecasts for the Japanese economy to 1.5% in 2010 from 1.2%, citing the strong growth in the Asian economies and the rapid recovery in the U.S. and Europe, and it also expects growth to remain around this level until 2012-2013.
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.