Japan Pumps Cash Into Market

Interest rate hikes unlikely
By Peter Fearon,  Newser Staff
Posted Aug 13, 2007 12:16 AM CDT
Bank of Japan Gov. Toshihiko Fukui (AP Photo/David Guttenfelder, File)   (Associated Press)
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(Newser) – The Bank of Japan pumped $5.1 billion into the Japanese financial system today as the  global credit crunch continued to ripple through the Asian markets, Bloomberg reports. Adding to the jitters, Japan's growth is slowing more markedly than economists predicted; the world's second-largest economy expanded by only 0.5% in the last quarter, compared to 3.2% the previous quarter.

The central bank meets in two weeks to decide whether to raise the key overnight lending rate from 0.5 percent, the lowest among major economies, which is unlikely now given economic indicators. Government officials expressed optimism that Japan would pull out of its current deflation, but consumers—whose spending accounts for more than half of the economy—are losing the incentive to buy.