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Japanese central bank reduces base rates

In possibly a sign of things to come for the worldwide economy it has been revealed that the Japanese central bank has further reduced base rates in the country to between 0% and 0.1% against a previous target of 0.1%. In effect we are back to the days of 0% base rates in Japan which followed the disastrous slump in the economy in the 1980s/90s which saw one of the longest-running economic downturns in living history.

It seems that investment in the Japanese economy has deteriorated somewhat over the last few months and the authorities are now seriously concerned about the short to medium-term outlook. The Bank of Japan is also setting up a $60 billion fund to acquire Japanese government bonds, commercial paper and other asset-backed securities to try and shore up the troubled money markets.

If the Japanese economy, the largest behind the United States and China, was to collapse this would be a major setback for the worldwide economy and would see all economies looking into the abyss. Despite the fact that only a few months ago many had hailed the end of the worldwide economic downturn it seems we are on the verge of credit crunch part two which could be even more damaging than credit crunch part one.

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