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October 28, 2009

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Home » Business » Economy

BOJ gets cabinet-level blast

JAPAN'S finance minister attacked the Bank of Japan yesterday for looking at the economy "in its own way," just days before the central bank considers whether to start withdrawing support for corporate funding.

The BOJ, similar to central banks elsewhere, has come under pressure from some cabinet ministers who worry that a quick end to its emergency support measures would hurt an economy just emerging from its deepest recession in 60 years.

"The BOJ has repeatedly said the economy is getting better, but they are dealing with different people," Finance Minister Hirohisa Fujii told a meeting of the heads of regional branches of the ministry.

"I believe everyone here is examining the situation in a more down-to-earth way."

The finance ministry's regional branches raised their view on the economy in their quarterly report for July-September, saying it showed some signs of a pick-up as output activity looked up, although the situation remained severe.

But that assessment appeared a little grimmer than the BOJ's view that Japan's economy has started to pick up.

The BOJ is leaning toward scrapping some corporate finance support programs in December, insiders said last week, rebuffing government pressure to delay an exit from credit markets.

To fend off criticism that the move could hurt Japan's fragile economy, the BOJ will stress that it will keep interest rates near zero and continue funneling abundant cash to the market.

Fujii said Tokyo would consider the bond market carefully when planning its new debt issuance, adding that new Japanese government bonds for fiscal 2010/11 must stay below 44 trillion yen (US$478 billion).

The benchmark 10-year Japanese government bond yield is hovering at almost a three-month high partly on concerns about the amount of bonds the new Democratic Party-led government plans to issue to pay for its spending plans.

"The issue of spending is important, but the condition of the bond markets is also important, so we're attaching the utmost importance to it," Fujii told a news conference yesterday.


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