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Last Updated: Tuesday, 11 April 2006, 07:05 GMT 08:05 UK
Japan leaves rates close to zero
A Japanese businessman looks at a board indicating Japan's Nikkei index closed at 17,045.34 points
The numbers are starting to stack up for the Japanese economy
The Bank of Japan has left its interest rates at close to zero, as it tries to keep the economic recovery on course.

Analysts said they now expect a quarter of a percentage point rate rise in July or August, as inflation returns to the world's second-largest economy.

As Japan's economy has become more robust, the central bank has been removing the excess cash it pumped into the economy to get it moving again.

On Tuesday, it reiterated its view that the economy was still improving.

Getting back to normal

"The level of economic activity has risen, as evidenced by the fact that various excesses have virtually been eliminated and firms are more aware of the shortage of labour," it said.

According to recent figures, the economy expanded by 5.4% during the final three months of 2005.

Jun Yamamoto of Mizuho Research said he expected the process of turning a "very abnormal state into a normal one for the economy" to continue steadily, with a first interest rate rise due during the summer.

Japan's stock market has been flagging the rising sense of optimism for some months now, with its benchmark indexes touching five-year highs.

At the same time, corporate profits have picked up, consumers have been spending more and the jobs market has improved.

Though the outlook is better, analysts warn that Japan's recovery is still fragile.

Earlier this year, the government called on the central bank not to act too quickly and to work with it to ensure that Japan emerged fully from a long period of deflation and repeated recessions.


SEE ALSO:
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Japan ponders post-deflation plan
27 Feb 06 |  Business


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