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Japan's Central Bank Raises Rates


Japan's central bank has raised its main interest rate for only the second time in six years - after predicting the Japanese economy will continue its moderate recovery. VOA's Michael Lipin in Hong Kong has more on that in this week's summary of top business news from Asia.

The Bank of Japan raised its key interest rate by a quarter of a percent to half a percent, raising the cost of borrowing to its highest level in more than a decade.

The central bank says it took the move because Japan's economy is expected to keep growing at a moderate pace - thanks to healthy gains in production, income and corporate spending. The bank also says Japanese consumer spending is rebounding from a weak period in the middle of last year.

Glenn Maquire is the chief economist in Asia for the Hong Kong office of investment bank S.G. He says it will be difficult for the Bank of Japan to raise rates again this year because inflation remains subdued.

"I think it is actually quite unlikely that we will see significantly more rate hikes from the Bank of Japan this year," said Glenn Maquire. "The key risk for the Bank of Japan is that we do see a return to deflation in coming months and we are expecting that will be the outcome, as oil prices drop quite quickly. We expect the economy probably to be posting deflation of around minus 0.2 percent through March."

Two days before the rate rise, Japan's Cabinet said in its monthly, February report that the economy is recovering, despite some weakness in consumption. The assessment was unchanged from the previous month.

Japanese truck maker Nissan Diesel has accepted a takeover bid from Swedish company Volvo, which wants to boost its presence in Asia.

Volvo, the world's number two truck maker, already owns 19 percent of Nissan Diesel, and will buy the remainder of the company for $1.1 billion.

Volvo says the takeover will allow it to cooperate with Nissan Diesel in research and development on cleaner vehicle emissions. Japan is set to introduce tougher emission controls in 2010.

South Korea's top automaker Hyundai Motor plans to send complete vehicle kits to Brazil for assembly there - to avoid high Brazilian customs duties on exporting manufactured cars.

Hyundai says the factory - in the central state of Goias - will assemble 50,000 vehicles a year by 2009.

India's largest coffee producer, Tata Coffee, says it plans to sell high-end instant coffee to overseas markets - such as Russia and Ukraine - using the Eight O'Clock brand name.

Tata acquired the Eight O'Clock coffee brand from U.S. firm Gryphon Investors last year. Tata says it will use the brand to sell freeze-dried instant coffee, which is more flavorful than the regular variety.

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