Central bank downgrades Japan's economic forecast

JAPAN has prolonged emergency measures designed to ease the flow of credit to companies, as the country&rsquo;s central bank downgraded its economic outlook.<br /><br />The Bank of Japan revised its April forecast of a 3.1 per cent contraction in 2009 to a record 3.4 per cent decline and extended emergency procedures to buy corporate debt from banks and give them unlimited loans, past an initial deadline of 30 September.<br /><br />The bank&rsquo;s governor Masaaki Shirakawa said: &ldquo;Financial conditions are improving but companies are still unconfident about the outlook for borrowing.&rdquo;<br />&ldquo;The Bank is definitely correct when it says the economy overall has stopped worsening,&rdquo; said Nikhilesh Bhattacharyya of Moody&rsquo;s.<br /><br />The central bank had some 473bn yen (&pound;3.1bn) of securities bought from struggling lenders as of 10 July and has also provided banks with unlimited three-month loans at 0.1 per cent.<br /><br />The forecast of a 3.4 per cent GDP contraction in the year ending March 2010 would be a record since the Second World War, with the economy a key issue ahead of Japan&rsquo;s general election on 30 August.