Last week it seemed like the Bank of Japan might be ready to join all of the other major central banks and hop on the rate hike train. This week they get some advice from the OECD, and that advice is "not so fast." From the Times Online:
THE OECD cautioned Japan yesterday against any over-hasty move to end its zero interest-rate policy, telling Tokyo that the world’s second-largest economy was only slowly emerging from deflation.
In an update to its forecasts, the Organisation for Economic Co-operation and Development threw its weight behind calls from Japan’s own Government, including yesterday from Junichiro Koizumi, the Prime Minister, for the country’s central bank to tread warily in ending its ultra-loose monetary policy aimed at defeating deflation...
“Japan may be at long last exiting deflation, but only very gradually so, despite vigorous growth, which argues for keeping the policy interest rate at zero over the near term,” Jean-Philippe Cotis, the OECD’s chief economist, said.
From Bloomberg, we are told that the markets apparently trust in Koizumi..
Japan's government bonds maturing in five years or less rose on speculation the Bank of Japan will take longer to raise interest rates than investors originally expected.
... but that doesn't mean standing completely pat:
Five-year notes gained the most in a week on rising expectations the central bank will increase rates only once this year rather than twice. The Bank of Japan, which starts a two-day meeting tomorrow, is likely to signal it is about to end a five- year deflation-fighting policy in two steps, analysts said. It will pump less cash into the economy before increasing its benchmark rate in the second half of the year.
Next move, BoJ.
UPDATE: The Skeptical Speculator gives us the latest from the Bank of Canada (raised the rate), the Reserve Bank of Australia (did not raise the rate), and the Bank of England (probably will not raise the rate).