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BOJ downgrades economic outlook
TOKYO, Japan -- The Bank of Japan has downgraded its outlook for the Japanese economy in its May monthly report on Wednesday, citing "greater uncertainty" ahead. The BOJ's gloomy view comes after government figures released last Friday showed Japan's economy has come to a halt, with zero growth in the first three months of 2003. Fading exports and a stronger yen have slowed growth in the world's second largest economy. Weakness in the United States -- a key market for Japanese manufacturers -- is also weighing on business sentiment, as is the SARS virus that has hit many Asian economies, particularly their travel industries. The yen, which is trading at 116.65 to the dollar in Tokyo Wednesday, strengthened to a two-year high of 115.12 on Monday on U.S. currency weakness. The stock market is softer, with the Nikkei 225 weakening from a solid start Wednesday morning to be 0.8 percent lower heading towards the close. The BOJ said in its May report that overall conditions were flat but the export environment was clouded by various factors. "There is greater uncertainty about the effects of SARS within the East Asian region, whose economies are closely linked to Japan's, as well as uncertainties regarding the recovery in the U.S. and European economies and developments in the U.S. dollar," it said, Reuters news agency reported. The BOJ eased credit on Tuesday to help bolster confidence in Japan's financial system. The move came three days after Resona, Japan's fifth-largest bank, was forced to ask the government for a bailout that may cost up to $17 billion in public funds. The central bank raised its target for banks' excess reserves to 27-30 trillion yen ($230-256 billion) from 22-27 trillion yen. The move was designed to ensure commercial banks have easier access to money if problems arise in the financial system.
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