BoJ governor: Economic conditions getting worse

LONDON: Bank of Japan governor Masaaki Shirakawa warned yesterday that economic conditions were deteriorating fast, and Japanese firms were finding it increasingly hard to secure credit.

“Sluggishness in economic activity has increased rapidly. Overseas economies are experiencing the same kind of rapid change,” Shirakawa said in a speech.

Euro zone manufacturing activity sank to a record low in November and the outlook was equally grim.

The Markit Eurozone Purchasing Managers Index (PMI) for the manufacturing sector slumped to 35.6 in November, a low not seen in the survey’s 11-year history and way below the 50 mark that separates expansion from contraction.

The euro zone was officially declared in recession last month following a second quarterly contraction in economic output. Analysts do not see the economy growing again until the third quarter next year – and then only marginally.

The financial crisis that began with a US housing market collapse last year and escalated into a full-blown global downturn has already knocked several big economies into recession including Germany, Italy and the euro zone. Most economists believe the United States and Britain will soon follow.

Similar surveys from China showed its manufacturing industry slumped in November as new orders, especially from abroad, tumbled.

The BoJ said it would hold an emergency policy meeting today to examine measures to help corporate finance.

Japan’s Economy Minister was even more gloomier than Shirakawa.

“We are moving to the next phase of shrinking consumption – some call it deflation – production going down and prices going down,” Kaoru Yosano told the Financial Times in an interview published yesterday.

Australia’s central bank is expected to almost certainly slash its benchmark rate by at least 75 basis points today on top of 200 basis points of cuts since early September, with a bigger move seen as a strong possibility.

US Treasury Secretary Henry Paulson and Federal Reserve chairman Ben Bernanke both make speeches later in the day. — Reuters

German retail sales unexpectedly fell in October, dealing a blow to hopes that consumer spending would help cushion the effects of a marked slowdown in global demand for German goods.

Sales fell by 1.6% month-on-month in real terms in October, sharply undershooting the consensus forecast for a 0.5% rise. — Reuters

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