THE Bank of Japan (BoJ) took emergency measures yesterday in a desperate attempt to rescue the country’s stagnant economy (growth rate 0.4%) and boost exports, which have been hit by the high exchange rate of the yen.
The BoJ said its decision to boost its low interest bank loan programme meant 30 trillion yen (£225bn) was now available for lending. The BoJ is to increase lending to commercial banks by 10 trillion yen (£75bn) and the government announced a 920 billion yen (£6.9bn) stimulus package.
The move by the central bank of the second largest capitalist state in the world, came only two days after the head of the US central bank, Federal Reserve Board Chairman Ben Bernanke, gave a gloomy account of finances and production in the US.
Bernanke told the Fed’s conference in Jackson Hole, Wyoming, at the weekend: ‘In many countries, including the United States and most other advanced industrial nations, growth during the past year has been too slow and joblessness remains too high.
‘Financial conditions are generally much improved, but bank credit remains tight; moreover, much of the work of implementing financial reform lies ahead of us.’
He added: ‘Overall, the incoming data suggest that the recovery of output and employment in the United States has slowed in recent months, to a pace somewhat weaker than most FOMC participants projected earlier this year.’
Bernanke was speaking just after figures on the US economy were published which showed that it grew by only 1.6% in the second quarter of 2010, revised down from an initial estimate of 2.4%. The growth figure for the previous three months stood at 3.7%. This makes the annualised average rate only 2.9%.
Figures, out last week, showed that new homes sales in the US fell by 12.4% in July, compared with June. This is the lowest sales since records began in 1963. Sales of existing homes in the US plunged 27.2% in July compared with June to their lowest level in over 10 years.
In response to this situation, the Fed Chairman has proposed four ‘unconventional’ policy options to boost the US economy:–
Quantitative Easing – buying up debts and pumping more paper money into circulation.
Communication – promising to keep rates low for longer, hoping this will convince lenders to keep rates down.
Paying zero interest on banks’ excess reserves at the Fed – effecting a cut in commercial rates.
Targeting a higher inflation rate – to avoid Japanese-style deflation.
Bernanke’s performance as a ‘smoke and mirrors’ illusionist convinced nobody.
A spokesman for Wall Street bankers Goldman Sachs wrote: ‘The overall tone was one of watch and wait, despite ongoing signs that US economic activity has not only dropped below its potential growth rate but has a significant probability of weakening further, at least as we see it.’
Jobless figures, due out on Friday, are expected to show that unemployment is still rising.
Jean-Claude Trichet, Chairman of the European Central Bank commented: ‘The debt overhang bears the ultimate responsibility for slowing down economic recovery.’
The problems of debt and other forms of fictitious (paper) capital can only be overcome through their transformation into real value and the only source of value is the exploitation of the working class.
For the ruling class the only strategy, that can postpone the demise of capitalism, is war on the working class, to slash living standards, smash welfare reforms and drive up exploitation.
For the working class the only strategy, that can defend living standards and provide a prosperous future, is the struggle to complete the World Socialist Revolution.
This is a revolutionary crisis. It demands the building of revolutionary parties, sections of the International Committee of the Fourth International, to organise and lead the working class in the struggle for workers’ governments in states like the US, Europe and Japan.
