Rising or unstable interbank rates make it difficult to reduce lending rates. At the same time, stronger than expected economic growth in the United States looks to scuttle hopes for continued monetary easing there. However, he dids not believe all hopes should be dashed for rate cuts. Lower rates could stem the default rate from corporate borrowers struggling to repay loans in current tough conditions. The fall of the Brazilian real has also re-ignited concern that Beijing could alter its exchange rate policy.
Some economists reject that scenario as unlikely.
Japan Share prices are expected to stay firm this week, sustained by growing hopes of a recovery in the battered banking sector. Last week, investor sentiment got help from a string of bank mergers and tie-ups. It was also bolstered by tough warnings from the country's top bank reform commission, which said it wanted an end to the country's bad-loan problem by March. However, they added that there would be a long way to go before prices recovered fully. The Nikkei-225 Index advanced 415.54 points last week to close on Friday at 14,154.4.