Monday, November 25, 2002
It's unanimous. First the Japanese government lowered its forecasts for the Japanese economy, then the Bank of Japan lowered its forecasts as well. The downbeat assessments were quickly followed by an equally gloomy report from the Organization for Economic Cooperation and Development. Although the OECD no longer expects Japan's economy to contract this year, it expects it to remain flat. That zero growth is an improvement is a telling indication of Japan's economic mess.
The Bank of Japan kept its monetary policy essentially unchanged Tuesday despite calls from politicians to do more to revive the stumbling economy. The Bank maintains an easy monetary policy, holding its reserve target steady between ¥15 to ¥20 trillion ($124 to $165 billion). Short-term interest rates have been at zero for more than a year and the Bank has boosted bond purchases from banks to increase money flows. The Bank and the government have been at loggerheads over monetary policy for some time now, with the Bank fiercely protecting its turf. Prior to the Bank's announcement, Finance Minister Masajuro Shiokawa repeated that he wanted further easing. The bank did say it would begin buying shares held by the nation's commercial banks starting at the end of next week, using a ¥2 trillion fund under a controversial decision announced in September. Analysts say the stock purchases, although symbolically significant, aren't big enough to do much for the economy.
Twelve of the 13 stock indexes followed here rose last week, with only Mexico registering virtually no change in its holiday-shortened trading week. The increases ranged from 0.6 percent for the Singapore Straits Times to 4.5 percent for the Paris CAC. Some better-than-expected earnings reports combined with positive U.S. indicators gave investors a boost. The volatility that has been so apparent in the markets cooled a bit as well. Investors, disappointed by the ECB's lack of sensitivity to Europe's growing pains, sold the euro, which as a result, dropped below parity with the U.S. dollar on Friday afternoon.
Investors gobble up equities
