Japan’s Central Bank Is Poised to Cut Key Rate

Japan’s central bank today was in the final stage of deciding the scale and timing of a cut in its key lending rate, already at a historic low of 1%, to bolster the flagging economy, Japanese media said.

NHK public radio network and other media said the rate would most likely be cut by 0.5 percentage point to 0.5%, but that a cut of 0.25 point was still an option.

“It (a rate cut) might be implemented today, but there is a possibility that it will come next week,” NHK said, without citing specific sources.

A senior official at the central bank declined to comment about the timing of any cut in the discount rate, saying that a decision on the rate would be up to the bank’s policy board.

Speculation has been rife that the Bank of Japan would soon cut the discount rate, which it charges on its loans to other banks, because economic recovery has stalled. Some financial market participants have speculated that the central bank might act today to coincide with the release of its quarterly survey of companies, called the tankan .

The survey, a key gauge of corporate sentiment, is an important factor for the central bank in determining monetary policy.

Japan’s leading financial daily, Nihon Keizai Shimbun, also said the Bank of Japan was close to cutting the discount rate, but added that the timing was fluid.