Bank of Japan is lowering rates to boost economy
TOKYO -- The Bank of Japan, in a surprise announcement, said Friday it will lower the money-market interest rates it controls in an effort to boost economic growth.</br></br>The central bank, in saying it would usher short-term market interest rates lower, didn't disclose a specific target. But immediately after the announcement, Japan's key short-term money-market rate was trading at 0.8%, a record low. By lowering the cost of money, the move will encourage new bank lending and growth.</br></br>The move, which followed an announcement by the U.S. Federal Reserve that it would lower short-term interest rates, caused stock and bond prices to surge in Japan. At the end of the morning session Friday, Japan's benchmark Nikkei 225-stock average was up 633.21 points, or 4.1%, to 15,890.10.</br></br>"This is a big, big move," said Marshall Gittler, an analyst at Merrill Lynch & Co. in Tokyo. A surge in bond prices caused the yield on the benchmark government bond, an interest rate that falls as the bond's price rises, to hit a record low of roughly 2.5% in trading late Friday morning.</br></br>The move confirms the government is concerned that Japan's economy is teetering on the brink of recession. By one measure, gross national product, Japan already fell into a recession during the first quarter of this year.