TOKYO - BANK of Japan governor Masaaki Shirakawa on Tuesday rejected the idea of coordinated interest rate cuts, saying central banks should set policy based on the health of their own economies.
Joint action may result in one country doing something that is not favourable for its own economy, he told a press conference after the Bank of Japan left its key interest rate unchanged at 0.5 per cent.
'Each country will make its own decision considering its own conditions,' Mr Shirakawa said, adding that there was no need at the moment for coordinated interest rate cuts.
Traders are looking closely for any signs that central banks may take joint steps to try to ease the current financial turmoil, and in particular whether they will cut interest rates to shore up the global economy.
Finance chiefs from the Group of Seven rich nations - Britain, Canada, France, Germany, Italy, Japan and the United States - are scheduled to meet on Friday in Washington.
Speculation about possible rate cuts grew on Tuesday after the Australian central bank slashed official borrowing costs by a hefty one percentage point.
The G7 finance ministers and central bank governors will exchange 'frank views' on the current crisis when they meet this weekend, Mr Shirakawa said.
He stressed that the central banks of Japan, Europe and the United States have already been working together to supply emergency funds to the markets in an effort to ease the financial crisis.
'Our system of cooperation has already been established,' he said.
The BoJ's decision to stand firm on rates came amid renewed chaos on financial markets.
The Nikkei index tumbled more than five percent at one point on Tuesday, dropping below 10,000 points to hit a near five-year low.
The central bank injected emergency funds into the short-term money market for a 15th straight day, adding 1.0 trillion yen (S$14.4 billion) to try to prevent a domestic credit crunch. -- AFP
