Japan Holds Rate at 0.1%

123jump.com Staff
07 Apr, 2009
New York City

By a unanimous vote the Bank of Japan left its key lending rate unchanged at 0.1% and accepted broader collateral from banks. The move is expected to improve credit access at smaller and regional banks. Stocks fell in the session. Softbank Mobile added 2 million net subscribers in fiscal 2008.

[R]5:00AM New York, 7:00PM- Bank of Japan keeps its key rate at 0.1%. Rio Tinto temporarily cuts iron ore prices 20%.[/R]

The benchmark stock index in Japan fell after the Bank of Japan left its key lending rate unchanged at 0.1%. Investors were also unnerved by falling crude oil prices.

In Tokyo trading Nikkei 225 index dropped 0.3% or 25.03 to 8,832.85.

In the first section of the Tokyo Stock Exchange 22.7 billion shares worth 1.4 trillion yen were traded and in the second section 328 million shares valued at 2.6 billion yen changed hands.

Of the Nikkei 225 index stocks, 102 rose, 111 declined and 12 were unchanged. Pioneer Corp. led gainers in the index shares with a rise of 13.2%.

Bank of Japan Keeps Key Rate at 0.1%

By a unanimous vote the Bank of Japan left its key lending rate unchanged at 0.1% and accepted broader collateral from banks. The expanded collateral will include bonds of the central government and municipal bonds. The move is directed at smaller and regional banks that do business with small and medium sized businesses.

The Bank of Japan lowered last its lending rate in December and since then has focused on easing liquidity for large corporations and purchasing central government bonds. However, the easing of credit conditions has not filtered down to smaller companies.

Today’s move by the BoJ goes beyond symbolic move to help smaller companies. The BoJ holds 111 trillion or $1.1 trillion in collateral at the end of March and the today’s pronouncement will expand that to $5 trillion.

The interbank rate in Tokyo known as Tibor and the spread between the commercial paper and government bond of similar maturity has shrunk considerably but accessing the credit is still tight for most individuals and companies.

The consumer price index, excluding fresh food, is expected to become negative due to weakening supply and demand conditions. Though the central bank forecasts the global economy will rebound in the latter part of next year, uncertainty continues to be high.

The Bank of Japan in a statement noted, “Today’s decision to expand the range of eligible collateral was made with the view to ensuring stability in the financial markets. In addition, to secure stability in the financial system, the Bank resume its purchases of stocks held by banks and is examining the specifics of providing subordinated loans to banks.”

Rio Offers Interim 20% Price Cut for Asian Steelmakers

Bloomberg News reported today that Rio Tinto has offered an interim 20% price cut to Asian steelmakers as annual contract negotiations stalled.

The mining company has offered a 20% reduction for iron ore fines and 25% for iron ore lump.

Chinese companies, who were pushing for a 40% to 50% slash, are rejecting the discount as too small.

Mills are advocating for cuts in benchmark annual prices to $50 a metric ton, while iron ore makers say they can get higher prices selling the material on the spot market.

Gainers & Losers

Pioneer Corp. led advancers in the Nikkei 225 index shares with a rise of 13.2% followed by gains in CSK Holdings Corp. of 12.4%, in Clarion Co. Ltd. of 10.6%, in Mazda Motor Corp. of 6.6%, and Ebara Corp. of 4.7%.

NTT Data Corp. led decliners in the Nikkei 225 index shares with a fall of 5.2% followed by losses in NSK Ltd. of 4.9%, in Yamaha Co. of 4.5%, in Shinsei Bank of 4.4%, and Taiyo Yuden of 4.2%.

Steelmakers dropped on news that Rio Tinto has decided to cut its iron ore prices for Asian steelmakers by 20% in the interim. Kobe Steel dipped 4% and Nippon Steel tumbled 3%.

Softbank Mobile Corp Gains Net 2 million Subscribers in 2008

The Telecommunications Carriers Association reported today that Softbank Mobile Corp. gained a net 2,046,700 subscribers in fiscal 2008, which is the highest among Japan''s mobile phone operators.