Markets foresee additional global interest rate cuts in Dec.

TOKYO, Nov. 10 Kyodo - Financial markets are increasingly anticipating a further coordinated action to cut interest rates by major central banks in December, given signs that the global credit turmoil has affected the world economy more widely, market watchers said Monday.

The Bank of Japan cut its key rate last month to 0.3 percent from 0.5 percent
for its first rate reduction in more than seven years. The central bank has
said Japan's credit conditions are accommodative enough, with Governor Masaaki
Shirakawa suggesting that a further rate cut would have a negative impact on
the Japanese economy.
But ''it would be difficult for the BOJ to decide to remain outside any
coordinated rate cut alone,'' a Japanese securities house official said.
Central banks in the United States and Europe have shown their resolve to fight
the credit turmoil by lowering interest rates.
In Britain, the Bank of England slashed its benchmark rate Thursday by a
larger-than-expected 1.5 percentage points to 3 percent, the lowest level in
over 50 years.
The same day, the European Central Bank cut its key borrowing cost by half a
percentage point to 3.25 percent, and Jean-Claude Trichet, ECB president, said
he would not exclude a further cut in December.
In the United States, where individual consumption has declined sharply and the
jobless rate in October jumped to the highest level in nearly 15 years of 6.5
percent, the Federal Reserve, which has cut its key rate to 1.0 percent, is
expected to bring it lower to 0.5 percent next month, the market watchers said.
While the real economy has deteriorated faster than earlier expected with
companies performing poorly and employment conditions getting tighter, the
International Monetary Fund last week forecast negative growth in the U.S.,
Japanese and European economies at the same time for 2009, which would be the
first such development since the end of World War II.
Under the circumstances, leaders from both advanced and emerging economies will
gather in Washington later this week for an emergency meeting hosted by U.S.
President George W. Bush to discuss how they can quell the credit crisis. They
are expected to consider additional monetary and fiscal policy instruments,
they said.
There are increasing signs in Japan that the financial storm has begun to
affect the country's major companies through weaker exports due to the sluggish
U.S. and European economies. Toyota Motor Corp. has sharply downgraded its
earning estimate for the current business year through March.
Yasunari Ueno, chief economist at Mizuho Securities Co., said growing
expectations of further interest rate cuts by central banks are due partly to
receding fears of price hikes after upward pressure on crude oil and other
commodity prices eased recently.
''Considering the rapid deteriorations in economies and receding inflationary
risks, there are no views that (central banks) have ended'' their interest rate
cuts, Ueno said.