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Last Updated: Thursday, 16 November 2006, 07:22 GMT
Japan interest rates kept on hold
Japanese production line worker
Japanese economic growth could fuel a further interest rate rise
The Bank of Japan has kept interest rates on hold at 0.25%, as policymakers take stock of the pace of recovery in the world's second-largest economy.

The bank's nine-member policy board voted unanimously to freeze rate, a move widely expected by economists.

The central bank ended its five-year policy of keeping base rates at zero in July, in a bid to stimulate growth.

Japan's economy grew more strongly than expected in the third quarter, but consumer demand has remained sluggish.

Last week, the government reported that machinery orders - a key gauge of corporate spending - had fallen by 7.4% in September from the previous month.

Bottom line

Despite the mixed economic signals, many analysts are anticipating a further rise in Japanese rates in the coming months.

"It would not be a surprise if it moves to hike rates before the end of this year," said Tatsushi Shikano, senior economist at Mitsubishi UFJ Research and Consulting.

Bank of Japan governor Toshihiko Fukui has himself suggested that a gradual rise in interest rates would be unlikely to harm the country's recovery.

"The bottom line is that the GDP data gave the Bank of Japan more freedom to choose the date of its next rate hike," said Masaaki Kanno, chief economist at JP Morgan Securities.

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13 Sep 06 |  Business
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11 Aug 06 |  Business

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