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Japan may follow Fed in rate cuts; Hungary in bailout
(Agencies)
Updated: 2008-10-29 14:59 Japan signalled on Wednesday it could follow the United States in cutting interest rates this week to protect the world's two largest economies from the global financial crisis.
A huge rescue package for Hungary underlined the pain the worst financial upheaval in 80 years was causing as policymakers around the world scrambled to contain the economic damage. The Bank of Japan will consider cutting rates at a policy meeting on Friday but will watch market conditions before deciding, according to a source informed on the matter. Bets on a quarter-point cut to 0.25 percent snapped the recent surge in the yen, which has hurt exporters and helped hammer Japanese shares. The Federal Reserve is widely expected to cut US rates by at least half a point on Wednesday to 1 percent, the lowest level since June 2004. Japan's Nikkei share average, which fell to a 26-year low this week, set the tone for the region's stock markets with a 6.4 percent jump during the morning session that built on Tuesday's gain of more than 6 percent. The rally followed gains on Wall Street, which buoyed by Fed rate cut hopes, had its second-best day ever on Tuesday. "Although cutting rates might not have much stimulative effect on the economy, it's hard for the bank to continue resisting action when financial markets are so unstable," said Koichi Haji, chief economist at NLI Research Institute in Tokyo. "Still, a rate cut would send a message to the world that Japan is cooperating with other nations in tackling the financial crisis," he said. "Now that the news is out, markets would be hugely disappointed if the BOJ didn't cut rates." |
