BOJ Left Rates at 0.5%, Coal Price Surges

123jump.com Staff
09 Apr, 2008
New York City

The new governor at the Bank of Japan left key interest rate unchaged at 0.5% and warned that economy is sluggish and private investment from businesses is declining. Japanese steelmakers agreed to pay nearly three times for the coking coal from Australia. Coal miners in Australia have raised prices for the last five years to take advantage of economic boom in China and India. Earlier South Korea agreed with a similar price hike.

[R]5:00AM New York, 7:00PM Tokyo - Bank of Japan keeps key rate unchanged at 0.5%[/R]

Stocks in Japan fell for the second day on a bearish outlook for homebuilders and realty stocks.

Market sentiment

In Tokyo trading Nikkei 225 slipped 1.05% or 138.54 to 13,111.89, and the broader Topix Index fell 1.5% or 19.79 to 1,262.90.

In the first section of the Tokyo Stock Exchange 6.7 billion shares worth 779 billion yen were traded and in the second section 145 million shares valued at 2.8 billion yen changed hands.

Of the Nikkei 225 index stocks 49 gained, 170 declined and 6 were unchanged. Obayashi Corp. led decliners in the Nikkei 225 index shares with a drop of 9.40% after the company reported that its annual profit plunged 54% as a rising yen and high materials costs took their toll on earnings.

Bank of Japan keep key rate on hold

The Bank of Japan today unanimously elected to keep its key rate at 0.5% as the outlook on the global economy remains uncertain.

It was the first policy decision by Masaaki Shirakawa, who was also approved by parliament today as the Bank of Japan Governor.

However the Diet rejected the nomination of Hiroshi Watanabe as Deputy Governor.

Separately, the central bank reported in its Monthly Report of Recent Economic and Financial Developments for April 2008 that the country’s economic growth is slowing on high energy costs and materials prices.

The report notes that fixed investment from businesses has been declining on cautious sentiment and public investment remains sluggish. According to the central bank, Japan''s economy is expected to grow at a slower pace in the current fiscal year and follow a moderate growth path thereafter.

“Domestic corporate goods prices are likely to continue increasing for the time being, primarily reflecting the rise in international commodity prices. The year-on-year rate of change in consumer prices is projected to follow a positive trend due to the rise in prices of petroleum products and food products in a situation where overall supply and demand in the economy are more or less balanced,” read part of the report.

Though the environment for corporate finance is accommodative, credit demand in the private sector has been more or less flat.

Also, the report also noted that the financial position of small and medium firms has deteriorated.

Gainers and Losers

Dentsu Inc led gainers in the Nikkei 225 index shares with a rise of 3.35% followed by rises in Hokuetsu Paper of 2.79%, in Pioneer Corp of 2.50%, in Toppan Printing of 2.43%, and Nippon Soda Co. of 2.40%.

Obayashi Corp. led decliners in the Nikkei 225 index shares with a fall of 9.38% followed by losses in Tokyu Land Corp of 8.55%, in Kajima Corp. of 7.12%, in Taisei Corp. of 6.37%, and Chiba Bank Ltd. of 6.36%.

Obayashi Corp. plummeted after reporting its annual profit slid 54% due to a strengthening yen and rising material costs.

Also Tokyu Land Corp. fell after Credit Suisse cuts ifs rating on the stock from “neutral” to “underperform”.

Other homebuilders declined as well. Sumitomo Realty shed 5.65% and Daiwa House Industries edged down 4.65%.

Nippon Steel to triple payments for coal

Bloomberg news reported today that Nippon Steel has agreed to pay BHP Billiton Ltd. and Mitsubishi Corp. three times more for coking coal at $300 a metric for the year started April 1 this year from $98 a ton in the year just ended.

According to the spokesman of the company Hiroshi Nakashima, the increase will add about 3 trillion yen in cost for Japan''s blast furnace mills.

Similarly, South Korean steel maker Posco has also agreed to pay three times as much for its coking coal.